Despite a huge surge in the market in the last one year, many active mutual fund schemes have underperformed their benchmarks, suggests a report by MorningStar India. Since the lockdown on March 25, the broader markets have recovered over 70%, but during this period most active managers have underperformed their benchmarks, says the report.
According to the report, only 3.45% large cap funds beat the benchmark in the lockdown year. On the other, 24% mid cap funds and 8.70% small cap funds were able to beat their respective benchmarks. In case of multi cap funds, some now re-categorised a flexi cap funds, just 11.76% were able to beat their benchmarks. Looking at the numbers from 19th February, 2020, 6.90% of large cap funds, 32% of mid cap funds and 18.18% of mutual funds beat their benchmarks.
While active fund managers have found it difficult to beat the benchmark over a one-year period, their performance over the medium term (three years and five years) has shown better success rates relative to the benchmark. The polarization of markets witnessed in 2018 and 2019 have now diminished and the sharp bounce back witnessed since March 2020 has been broad based, the report said.
Bear Market and Lockdown Period Performance
| |
Start of Bear Market to date (19th Feb 2020 to 22nd March 2021) |
Start of Bear Market to Lockdown Announcement (19th Feb 2020 to 24th Mar 2020) |
Lockdown start to Date (25th Mar 2020 to 22nd March 2021) |
| Category |
Avg Return |
% of Funds Beating Benchmark |
Avg Outperformance / (Underperformance) |
Avg Return |
% of Funds Beating Benchmark |
Avg Outperformance / (Underperformance) |
Avg Return |
% of Funds Beating Benchmark |
Avg Outperformance / (Underperformance) |
| ELSS (Tax Savings) |
20.52% |
19.51% |
-4.02% |
-33.50% |
68.60% |
1.20% |
84.69% |
9.76% |
-9.72% |
| Mid-Cap |
28.27% |
32.00% |
-1.68% |
-33.00% |
90.40% |
2.80% |
96.53% |
24.00% |
-10.89% |
| Large & Mid-Cap |
21.01% |
22.22% |
-3.52% |
-34.20% |
63.30% |
0.50% |
87.00% |
14.81% |
-7.40% |
| Large-Cap |
17.82% |
6.90% |
-5.25% |
-32.50% |
80.30% |
2.10% |
77.76% |
3.45% |
-14.11% |
| Small-Cap |
34.97% |
18.18% |
-4.92% |
-36.50% |
72.10% |
1.90% |
117.59% |
8.70% |
-16.39% |
| Multi-Cap |
20.12% |
17.65% |
-5.07% |
-33.30% |
75.70% |
1.70% |
83.97% |
11.76% |
-12.75% |
Source: Morningstar, India
Investors should continue to focus on asset allocation and continue with their investments and SIPs. If you were under allocated to equities as per your risk profile, continue to allocate systematically towards equities. Keep at least a 7-10 year investment horizon in mind with a volatile asset class like equities.
Longer Term Fund Performance (As on 22nd March 2021):
| |
1 year |
3 Years |
5 Years |
| Category |
Avg Return |
% of Funds Beating Benchmark |
Avg Outperformance / (Underperformance) |
Avg Return |
% of Funds Beating Benchmark |
Avg Outperformance / (Underperformance) |
Avg Return |
% of Funds Beating Benchmark |
Avg Outperformance / (Underperformance) |
| ELSS (Tax Savings) |
64.76% |
7.32% |
-8.55% |
10.58% |
10.53% |
-3.40% |
13.93% |
25.00% |
-1.75% |
| Mid-Cap |
73.60% |
24.00% |
-10.19% |
11.43% |
78.26% |
1.84% |
15.18% |
52.38% |
-0.12% |
| Large & Mid-Cap |
66.00% |
14.81% |
-7.33% |
10.93% |
9.09% |
-3.04% |
14.40% |
22.73% |
-1.29% |
| Large-Cap |
59.62% |
3.45% |
-11.61% |
11.73% |
7.14% |
-2.19% |
13.07% |
11.11% |
-2.26% |
| Small-Cap |
91.52% |
8.70% |
-13.99% |
8.64% |
53.33% |
1.02% |
15.17% |
42.86% |
-0.36% |
| Multi-Cap* |
64.10% |
11.76% |
-11.40% |
11.77% |
34.48% |
-1.30% |
14.06% |
25.93% |
-1.53% |
Source: Morningstar, India
*All funds which are currently in the Flexicap category have been considered under the erstwhile Multicap category since the change was more recent.
