Only 50% of equity funds with 5-year record have outperformed their benchmarks
Megha Vora 15 March 2011

At least 20% of the 121 funds made only single digit gains—worse than FDs, but for the tax advantage enjoyed by equity funds. This underscores the need to buy the right fund at the right time

As we enter the financial year 2011-12, it's a perfect time to take a hard look at your mutual fund holdings. While mutual funds are a great financial product for creating long-term wealth creation, it would be disastrous for you if you get stuck with a wrong scheme. The generalised saying that "mutual funds are a good investment product" has no value if you make mistakes in what you choose, when you buy, and when you sell.

One way of getting a fix on what to buy is fund performance over a long period of time. Moneylife has done an analysis of funds which have completed five years since inception. That means that the fund with the shortest duration is in existence from 2006. The Sensex was 10,802 around mid-March 2006 and it is now at around 18,440 in mid-March 2011. Thus it has risen by 11%, compounded in the last five years. These five years have been topsy-turvy.There has been a sharp rally, a huge decline and then a sharp rebound again.

Funds with an even longer duration than five years have gone through multiple cycles. They have gone through a number of bear, bull, volatile and stagnant cycles. They have had ample time to choose the correct stocks and show their performance over a long period. So let's look at the performance of 121 equity schemes, which have been around for five years and more.

These funds on an average fetched 17% returns. But averages can be deceptive. Out of 121 equity growth schemes, only 50% (that is 62) have outperformed their benchmarks; 52 schemes have underperformed; and 7 have just managed to equal their benchmark returns.

The top performing three schemes are Reliance Growth, HDFC Equity Fund and Sundaram Select Midcap. Reliance Growth was up by 28% while the other two fetched returns of 23% and 36% respectively. There is no trend among the top performers. So how should you interpret the data? Look for steady performers. Also look for fund houses that throw a lot of good performers year after year.  

For instance, among the outperformers there were six funds from HDFC Mutual Fund- HDFC Capital Builder Fund - Growth, HDFC Core & Satellite Fund - Growth, HDFC Equity Fund -Growth, HDFC Growth Fund-Growth, HDFC Premier Multi-Cap Fund - Growth, HDFC Top 200-Growth, with an average return of 21%. These funds have beaten their benchmarks by 7% on an average.

 If HDFC was the best fund house, UTI and JM funds drained out investors' wealth. Among the 20 worst performers UTI and JM had 4 each. JM funds have underperformed their benchmark by 14% on an average. These include JM Basic Fund (1%), JM Emerging Leaders Fund-Growth (-7%), JM Large Cap Fund-Growth (9%), JM Mid Cap Fund-Growth (12%).

Whereas for UTI, its funds have underperformed their benchmarks by 11% on an average. These include UTI Equity Fund-Growth (9%), UTI MasterShare-Growth (7%), UTI Top 100 Fund-Growth (6%), and UTI Variable Investment Scheme-Growth (6%).  All these funds are more than five years in existence.

Among the other 20 worst performers are Franklin India Smaller Companies Fund-Growth (6%), SBI Magnum Bluechip Fund-Growth (6%), L&T Multi Cap Fund-Growth (9%), Tata Midcap Fund-Growth (8%), SBI Magnum Equity Fund-Growth (7%), Taurus Discovery Fund-Growth (4%), HSBC Progressive Themes Fund-Growth (1%) and L&T Global Advantage Fund-Growth (-1%).

Disclaimer: All our mutual fund analysis is based on the data purchased from Mutual Funds India database, controlled by rating agency Moody's of US. While the analysis is our own we cannot guarantee the that Mutual Funds India has reported the data correctly.

 

Comments
paul dmello
1 decade ago
You have said hdfc is the best mutual fund manager but i have insvested since august 2010 and as of now i have lost wquite a few thousands since then in hdfc tope 200/hdfc equitee
Shashank
1 decade ago
Please do share the detailed analysis report or the web link where available - thanks.
bharat shah
1 decade ago
wish moneylife do research on 5 years' or more old diversified mutual fund schemes for minimum turnover over a period, and given optimum return, so that the investor could know who is investing in businesses, and not in price.
Nayan
1 decade ago
I would like to know, how one can write at Moneylife. i.e. an Article.

rajendra
1 decade ago
great eye-opener for our distributor community. we always try to advise good fund to the investor but the key is regular review. we must stress this need to the investor also. very good work. thanks.
Pankaaj Maalde
1 decade ago
Performance of most of the LIC MF 's schemes is also pathetic. There is no reference to this. request you to give details of all the schemes.
K B Patil
1 decade ago
I agree with a reader's comment about HDFC. In 2009, I invested in HDFC Equity Fund through Kotak Securities. When I received a statement from HDFC, the address of the investor was totally wrong i.e not my address but something totally different. On sending several emails to HDFC and calls, I got only stereotyped replies that I must take up the matter with Kotak Securities since it has come through them. So, for a routine matter like address correction, I had to struggle for a month.
Investor
Replied to K B Patil comment 1 decade ago
A few years ago, when investors purchased through online sites like kotak, the Mutual Fund got only the addresses from the online distributors who were responsible for the address. Now sebi has changed this and you can go directly to the fund for address corrections
R Balakrishnan
1 decade ago
This is brilliant. Globally less than ten percent of fund managers beat their benchmarks. We should be delighted that nearly half the fund managers outperform their benchmarks.
Debashis Basu
Replied to R Balakrishnan comment 1 decade ago
In a bull market...
Lets see what they do now.
Well, read our story today about the early MFs that's coming up in about 2 hours on this site
Pjasani
1 decade ago
wt about the HDFC tax saving plan & HDFC long term advantage fund??

Performance???

Prakash Hebalkar
1 decade ago
Why don't you give the full chart so we can all spot our wins and our mistakes! BTW choice of an appropriate benchmark is often a problem as there are more investment ideas than benchmarks, especially with sector funds or internationally focused funds.
endee
1 decade ago
I am a distributor of almost all AMCs since last 7 years. Most unfriendly, most unresponsive, in a personal touch manner caring for their problems & trying to sort out the queries, is HDFC. This expression is a result of personal experience especially over last 1-2 years since automation has been overused e.g. there is only one toll free no, one common board phone no for head office, all branches, one common email for investor/distributor and the chief investor grievance redressal officer. The email is auto replied with an assurance for a reply within 2-4 working days. The email reply may come in time but the contents will NOT do full justice to the query.There will NEVER be a personal call to the investor/distributor to solve the issues at hand. They are willing to spend on courier STANDARD FORMAT letters but NOT willing to talk or make client/distributor understand the problems & result in timely solutions.
Debashis Basu
Replied to endee comment 1 decade ago
thanks very much for sharing this information.
endee
Replied to Debashis Basu comment 1 decade ago
Thanks Debashis.
I request for an appointment with you for about 10 minutes between 3-4 pm or after the Seminar, on 22/3/2011 when I am coming to Moneylife Foundation Seminar. Pl confirm. Tks in advance.
Debashis Basu
Replied to endee comment 1 decade ago
Sure. Please mail me at [email protected]
mary
Replied to endee comment 1 decade ago
i had thought that the hdfc amc was one of the best! then who is better?
endee
Replied to mary comment 1 decade ago
There is none the best for 2-3 years or more and may remain so , also in the future. But DSP, Fidelity, Birla, DWS, Sundaram etc have fared better at some point of time.But the main thing is A SCHEME from an AMC which GIVES SUPERIOR RETURNS on a risk/returns parameter. One MUST continuously keep monitoring every 3-6 months & modify one's portfolio, based on the conclusions / performance then taken.
mesa
1 decade ago
Please compare gold price, select mutual funds, fixed deposits. Your article though informative is not comprehensive
mary
1 decade ago
sir,

thx.
very informative analysis.
but where is the complete list?
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