Logo


Tipping Point: Are you aware of large-cap funds' survivorship bias?

Why is it important to keep survivorship bias in mind?

illustration: binay sinha
Illustration: Binay Sinha

Survivorship represents the percentage of funds that are still active at the end of a period compared to the number present at its start. In the table given below, large-cap funds had the least survivorship among equity categories at about 78 per cent over the five-year period .  Why is it important to keep survivorship bias in mind? Because it skews past returns of funds to look better than they actually are. Over a period of time, the mutual fund industry closes down or merges many of the funds that have not performed well. Once gone, their track record is not available ...