Business Standard

Why active mutual funds do not beat the index

Active mutual funds on average (and net of fees) underperform the index because they have less inside information than promoters of companies


Avinash Luthria
Indian active mutual funds (MFs), on an average, underperform the index. The S&P Indices Versus Active Funds (SPIVA) India report, the only robust analysis of Indian active MFs’ performance, has shown this conclusively. For example, it includes funds that have disappeared because they performed badly and hence were merged into better-performing funds. 

To clarify, a minority of active MFs do outperform the index. But that would happen even if all active MFs were run by the random number generator function of a spreadsheet programme. This is an extremely simplified explanation for why active MFs are, on an average, unable to beat
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: Nov 20 2022 | 9:44 PM IST

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