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For investors with long-term goals, mid-cap funds must be a part of their asset allocation according to their risk appetite.
But for those investors patiently holding on to ABSL Midcap Fund, despite its sustained under performance, it may be time to bid good bye and switch to better alternatives.
Basis short- and long-term point-to-point returns as well as rolling returns (for the last 10-year period), the actively-managed scheme has consistently under performed benchmark NIFTY Midcap 150 Total Return Index. SIP returns too have lagged.
The last one year has witnessed the fund category clock an average 24.4 per cent rise as mid-caps saw a decent rally, with the best fund performers rising by over 30 per cent. Even in this period, the 17-odd per cent returns of ABSL Midcap (assigned 1 star by BL Star Track MF Ratings) places it near the bottom of the pack. Hence, investors can lock these gains and switch to a Nifty Midcap 150 Index Fund that offers pure-play exposure to mid-caps and at half the cost.
Uninspiring show
One of the oldest actively-managed funds in this space, ABSL Midcap (erstwhile Birla SL Mid Cap) has failed to live up to its promise. Despite its vintage and large AMC lineage, the fund sports an assets under management figure of around ₹4,000 crore. Sustained uninspiring performance for many years is a reason for this. The fund has failed to consistently remain in the top two quartiles of its category and at least match benchmark return.
In the 10-year period CY 2013 to 2022, the fund has annually posted negative returns four times. Importantly, its returns have lagged Nifty Midcap 150 index in seven years (2022, 2020, 2019, 2018, 2017, 2016, and 2013). Even in its best performing years such as 2014, 2017 and 2021, the fund just managed to gain lower-mid/upper-mid quartile rankings.
The fund’s underperformance is evident when you compare with benchmark’s one-, three-, five-, and 10-year point-to-point returns. Returns of Nifty Midcap 150 index has beaten ABSL Mid Cap by about 10 percentage points in one-year, 4 percentage points in three-year, 5 percentage points in five-year and 3 percentage points in 10-year period.
Also, the fund’s rolling returns (mean) for one-year, three-year, five-year and seven-year over July 2013 to 2023 period are consistently lower than Nifty Midcap 150.
SIP investors are not better off either, with returns of ABSL Mid Cap lower than that of the benchmark lower across various time periods (see table).
Alternative options
Frequent changes of fund managers, who bring their unique style and approach, could be one of the reasons that has impacted ABSL Mid Cap’s long-term performance.
It’s upside capture ratio measured over various time periods has rarely crossed 100 per cent, while downside capture ratio has remained in the early 90s. This shows the fund has neither played strongly during periods of market strength, nor defended well in weak phases.
Investors can switch out of ABSL Midcap Fund and invest in a Nifty Midcap 150 Index Fund. Out of half-a-dozen options, we prefer Motilal Oswal Nifty Midcap 150 Index Fund and Nippon India Nifty Midcap 150 Index Fund. Both have decently-long NAV history, competitive expense ratio and low tracking difference and tracking error.
If you prefer actively-managed mid-cap funds, consider Kotak Emerging Equity (4-star rated), Edelweiss Mid Cap (4-star rated) and Motilal Oswal Midcap (3-star rated).
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