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

Image
Premium

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 www.business-standard.com or the Business Standard newspaper

Don't miss the most important news and views of the day. Get them on our Telegram channel

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

Explore News

To read the full story, subscribe to BS Premium now, at just Rs 249/ month.

Key stories on business-standard.com are available only to BS Premium subscribers.

Register to read more on Business-Standard.com