Equity mutual funds lag on risk-adjusted basis during five-year period

One in three equity mutual fund (MF) schemes has beaten its benchmark on a risk-adjusted basis during the five-year period (2020-25), going by their information ratios (IRs), a performance metric fund houses have started publishing only lately. 

An IR shows how effectively an investment manager generates excess returns relative to a benchmark, considering the risk taken. 

The IR generally ranges between 1.5 and -1.5. The higher the IR, the better is the fund manager’s performance. 

“A higher IR indicates that the fund manager is more consistent in generating returns relative to the benchmark, and a lower IR shows that the