consistency on returns by equity diversified funds - a colour chart representation
TRANSCRIPT
RETAIL RESEARCH
In this note, we have presented the colour charts for Equity Diversified fund categories such as Equity Large-cap, Equity Mid & Small-cap, Equity Multi-cap and ELSS funds to understand which ones delivered consistent performance during the various set of time frames. For this, we have measured the performance of these categories in three different ways by considering the different set of time frames.
I. Year on Year performance of the schemes for the last seven years.
II. Performance during various cycles such as Bull run, Bear run, Sideways market and Volatile periods that were seen in the domestic equity market in the last seven years period.
III. 3 year rolling performance of the schemes on different period sets. For this, we have chosen seven periods of five years each that going back by six months like
Dec-2015 to Dec-2010, Jun-2015 to Jun-2015, Dec-2014 to Dec-2009, Jun-2014 to Jun-2009, Dec-2013 to Dec-2008, Jun-2013 to Jun-2008 and Dec-2012 to Dec-2007. The measurement of rolling performance on multiple periods shows clear picture of the consistency of the schemes over periods.
Selection criteria: The schemes considered are the top performers in the top quartile in most of the time frames. The schemes with corpus of Rs. 300 crore below are excluded for our study. Further, the schemes with minimum seven years NAV history are only considered. This resulted in exclusion of some of outperforming schemes in the recent times such as Axis Long Term Equity, Mirae Asset Emerging BlueChip, etc. Takeaways: The study shows,
None of the scheme can be an outperformer in all the time frames (barring a few). The scheme that posted spectacular returns before three years has now become average performer and vice versa. In reality, it is very difficult for a fund manager to keep outperforming his schemes all the time against the peers as situations/flavours keep changing and he may be reluctant/slow to change his strategy in tune with the changing circumstances.
Only few schemes stand out as consistent outperformers among the schemes (barring one-off period) in all the time frames and market cycles.
The findings from the study are suitable for the investors who wish to keep investing in mutual funds with the long time horizon of five years and more.
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Dec 05, 2015
Consistency on Returns by Equity Diversified Funds – Colour charts
representation
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Equity Large-cap Category:
i. Performance based on the 3 year rolling returns of the schemes that calculated from multiple set of periods:
The comparison over multiple rolling periods would give us a clear picture on the consistency of the schemes from the categories. Based on the above chart, the top three schemes are ICICI Pru Focused BlueChip Eq Fund, Birla SL Frontline Equity and HDFC Capital Builder Fund.
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ii. Performance based on year on year returns (calendar year):
As stated above no scheme was the topper in more than 2 out of seven periods. Hence calendar year performance is not consistent due to changing flavours/trends in the markets.
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iii. Performance based on various equity market cycles:
Some schemes do well in sideways/volatile matkets (eg SBI Bluechip) while others do well in bull runs if their investment style is in tune with the trend in the markets (eg HDFC Equity). Schemes that took timely action on shifting to low beta defensive stocks did well in the bear run.
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Equity Mid & Small-cap Category:
i. Performance based on the 3 year rolling returns of the schemes that calculated from multiple set of periods:
Based on the above chart, the top four schemes are Religare Invesco Mid N Small Cap Fund, BNP Paribas Midcap, SBI Emerging Business and HDFC Mid-Cap Opportunities Fund.
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ii. Performance based on year on year returns:
Based on the above chart, the top three schemes are Canara Rob Emerg Eq Fund, DSPBR Micro-Cap Fund and HDFC Midcap Opportunities.
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iii. Performance based on various equity market cycles:
DSP BR Micro-cap Fund has done well in bull runs.
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Equity Multi-cap Category:
i. Performance based on the 3 year rolling returns of the schemes that calculated from multiple set of periods:
Based on the above chart, Birla with its three schemes has been doing well over periods. Franklin India High growth is now emerging as a challenger.
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ii. Performance based on year on year returns:
Based on the above chart, the top three schemes are Birla SL India Opportunities has done well in three years. Franklin India High growth is emerging as a serious contender.
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iii. Performance based on various equity market cycles:
Based on the above chart, there are no standout performers in this category.
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Equity ELSS Category:
i. Performance based on the 3 year rolling returns of the schemes that calculated from multiple set of periods:
Based on the above chart, the top two schemes are Reliance Tax Saver Fund and BNP Paribas LT Equity. We have not considered in the above table, Axis Long Term Equity Fund, one of best performing schemes from the ELSS category as the scheme has not met the criteria of having minimum 7 years of NAV history.
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ii. Performance based on year on year returns:
Based on the above chart, the top two schemes are Birla SL Tax Relief '96 and HDFC Taxsaver.
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iii. Performance based on various equity market cycles:
Based on the above chart, there are no standout performers in this category.
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Analyst: Dhuraivel Gunasekaran ([email protected]) Source: NAVIndia & ACEMF
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This report has been prepared by the Retail Research team of HDFC Securities Ltd. The views, opinions, estimates, ratings, target price, entry prices and/or other parameters mentioned in this document may or
may not match or may be contrary with those of the other Research teams (Institutional, PCG) of HDFC Securities Ltd.