Majority of equity, debt mutual funds underperformed benchmarks over 5 yrs

Majority of equity and debt mutual funds underperformed their benchmark indices over the five-year period ended December 31, 2014, shows data from the SPIVA India scorecard.

However, the S&P Indices Versus Active Funds (SPIVA) scorecard, which tracks performance of actively managed mutual funds against their benchmarks, found that equity mid/small- cap and Equity-Linked Saving Schemes outperformed their respective benchmarks over the same period.

“Over shorter time periods, actively managed funds may outperform the benchmark, but it becomes difficult for the fund managers to maintain the performance over longer periods,” Asia Index Private Limited Senior Analyst Utkarsh Agrawal said.

“This is evident in the Indian equity large-cap and debt fund peer groups. Actively managed equity mid/small-cap funds outperformed the benchmark over five-year period but the survivorship rate was lowest at 70 per cent,” he added.

According to the scorecard prepared by S&P Dow Jones Indices, 24 per cent of funds in the large-cap index underperformed the S&P BSE 100 over the one-year period.

But over three and five-year periods, 58 per cent and 53 per cent of funds underperformed the benchmark, respectively.

S&P BSE 100 and equity large-cap fund segment both posed a five-year annualised return of 10.97 per cent.

Besides, the majority of funds in the ELSS and equity mid/small-cap categories outperformed the S&P BSE 200 and S&P BSE mid-cap indices, respectively over all of the time periods observed.

"For the ELSS category, percentage of funds that underperformed the benchmark over the one, three and five-year periods was five per cent, 14 per cent and 31 per cent, respectively," the report noted.

For the mid/small-cap categories, the percentage of active funds that underperformed the benchmark over one, three and five-year periods were 11 per cent, 22 per cent and 36 per cent, respectively, it added.

In the five-year period, S&P BSE 200 gave a return of 11.10 per cent, while ELSS funds gave a return of 13.63 per cent.

Further, S&P BSE Mid-cap gave a return of 12.91 per cent, while mid/small-cap funds offer a return of 17.88 per cent during the period under review.