Active versus passive schemes: Smallcap funds triumph their benchmarks

The performance marks a reversal in the trend seen in the midcap and smallcap space in the last 12-18 month period, wherein majority of the schemes were found to be trailing their benchmarks

Active equity mutual fund schemes have improved their showing across key categories over the past three months vis-a-vis their benchmarks.

All active smallcap funds have beaten the BSE SmallCap 250 Total Return Index (TRI) index for a three-month period. But the share of outperforming midcap and largecap schemes stands at 79 per cent and 67 per cent, respectively.

The BSE SmallCap 250 TRI has gone up just 2 per cent in the past three months. The BSE 150 MidCap TRI, which is the designated benchmark of most active midcap schemes, is up 11 per cent. Largecap index BSE 100 TRI has gained 5.5 per cent in the same period, according to data from Value Research.

The performance marks a reversal in the trend seen in the midcap and smallcap space in the last 12-18 months, wherein majority of the schemes were found to be trailing their benchmarks.

Despite the improved show in the last three months, almost 75 per cent of the active midcap and smallcap funds are still behind their respective BSE indices.

The largecap space — where alpha generation is considered more challenging — continues to witness better showing by active funds compared to the recent past.

In the one-year period, only 28 per cent of the schemes have failed to outperform the BSE 100 TRI.

The factors that dictate the performance of active funds vis-a-vis their benchmark largely depend on the exposure to stocks outside of the index and its relative performance to the benchmark.

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Period	% schemes outperforming*
	Largecap	Midcap	Smallcap
3 month	67	79	100
6 month	72	38	75
1 year	72	28	25
3 year	52	36	82
5 year	43	27	95
10 year	68	30	100
*compared to BSE 100 TRI, BSE 150 MidCap TRI and BSE SmallCap 250 TRI

Source: Value Research