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Edelweiss MF moves to 'total returns index' benchmarking

The move by these to fund houses may force other players also to follow suit

BS Reporter  |  Mumbai 

Edelweiss MF moves to 'total returns index' benchmarking

Asset Management on Monday said it will disclose the performance of its equity mutual fund (MF) schemes against the 'total return index' of their respective benchmarks.

Total return index factors in dividend income. Currently, most funds are benchmarked to price return index, which just capture the price performance of underlying stocks. According to Edelweiss, the total return index is a more accurate measure of performance and a better measure of capturing true alpha-the excess returns.

Last month, another asset manager DSP BlackRock announced that it would disclose the performance of its equity MF schemes with the total return index (TRI) as the benchmark.

The move by these to fund houses, may force other players also to follow suit.

"Going forward, all equity schemes of Edelweiss Mutual Fund will be benchmarked to the Total Return Index rather than Price Return Index. We think this practice will provide an accurate picture of the performance of our funds relative to their benchmarks, both internally and externally. It is important for us to take this step today because in our journey to build a quality asset management business, it is important to set high standards for ourselves - both in investment management and investor communication," says Radhika Gupta, CEO, Edelweiss Asset Management.

While the performance of the mutual fund scheme is a function of dividend as well as the capital gains made on investments, returns on the price return index of these benchmarks are considered without any dividend income. Total return index, when measuring performance, reflects the actual return on an investment which includes capital gains and dividends paid by the underlying companies over a given evaluation period.

Most follow benchmarking to total return indices.

First Published: Mon, September 04 2017. 19:04 IST
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