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Do active Mutual Funds provide alpha? Or is passive investing the best bet?
I was surprised that the average of the best of the best picks by Sohn under performed Sensex and Nifty over 1 and 2 year periods
LINK : https://twitter.com/IndiaER/status/988878527687671808
I then did a research and discovered that CRISIL MF rating are not helpful and 90% of large cap mutual funds UNDERPERFORM the Sensex!!
Why not buy an Sensex ETF/index fund rather than trying to pick a mutual fund?
Based on another discussion today, Deepak Sheny suggested we try this:
Assume you take the top decile fund as of a certain date say 2013. Then you see how those funds did since then even if they are not the top decile now, have they beaten the index.
So lets attempt this exercise!
Step 1: How do you get the data for 2013?
I want to try something anyone without access to paid sources can try
So I tried the Internet Archie way back machine. I looked up the large cap funds in Money control on Jan 26 2013
There are 51 Large cap mutual funds with 5 year returns. Here are the top 15
Mutual Fund Scheme
|AUM (Rs. cr.) Dec 2012||1mth||3mth||6mth||1yr||2yr||3yr||5yr|
|UTI Opportunities Fund (G)||Rank 1||1764.04||1.4||3.7||15.8||20.7||8.5||11.2||10.7|
|HDFC Top 200 Fund (G)||Rank 2||12122.23||5||8.3||20.4||24.9||5.1||10.2||10.6|
|ICICI Pru Top 100 Fund -Inst -I||Not Ranked||19.13||7||11.1||21.5||27.9||10.1||12.2||9.9|
|Birla SL Frontline Equity -A (G)||Rank 2||2935.67||3.6||9||23.8||29.9||6.8||9.1||9.3|
|Franklin India Bluechip (G)||Rank 2||5040.43||4.6||9||18.3||21.8||6.2||10||9.0|
|DSP-BR Top 100 Equity - RP (G)||Rank 3||3429.77||2.9||8.3||19.5||21||6.1||8.6||8.9|
|L&T; India Large Cap Fund (G)||Rank 2||375.25||3.3||5.1||15.8||17.4||2.8||8.8||8.3|
|ICICI Pru Top 100 Fund (G)||Rank 2||398.95||6.8||10.7||20.6||26.1||8.6||10.6||8.2|
|DSP-BR Top 100 Equity - IP (G)||Not Ranked||139.22||2.9||8.5||19.9||21.6||6.5||9.1||8.1|
|L&T; Equity Fund (G)||Rank 1||2614.55||2.9||5.3||16.6||19||3.7||9.4||8.1|
|Birla Sun Life Top 100 (G)||Rank 1||297.68||3.4||8.7||21.6||28.8||7.6||9.6||7.5|
|HDFC Index - Sensex Plus Plan||Rank 2||89.52||4||6||18.2||22.2||5.5||8.8||7.5|
|Reliance Top 200 Fund-RP (G)||Rank 3||823.61||5||8.4||20.9||30.6||6.7||9.7||7|
|ICICI Pru Top 200 Fund -Inst -I||Not Ranked||13.48||3.9||8.5||20.3||28.4||5.9||9.5||6.5|
|Sahara Growth Fund (G)||Not Ranked||10.9||2.7||4.9||17.1||21.1||4.9||5.2||6.4|
|* Returns over 1 year are Annualised|
What is the performance of the top decline (top 6) in last 5 years? I took 6 as DSP-BR and Franklin India Blue Clip returns weer very close.
Names for almost all of them had changed. Again sued moneycontrol for the latest details
Mutual Fund Scheme (2013 name)
Mutual Fund Scheme (2018 name)
|5 YEAR RETURNS
|UTI Opportunities Fund (G)||UTI Value Opportunities Fund (G)||14.7|
|HDFC Top 200 Fund (G)||HDFC Top 100 Fund (G)||16.5|
|ICICI Pru Top 100 Fund -Inst -I||ICICI Prudential Large & Mid Cap Fund (G)||16.8|
|Birla SL Frontline Equity -A (G)||ABSL FrontlIne Equity (G)||17.9|
|Franklin India Bluechip (G)||Franklin India Bluechip (G)||15.3|
|DSP-BR Top 100 Equity - RP (G)||DSP-BR Top 100 Equity - RP (G)||14.8|
|ICICI Prudential Nifty ETF||15.3|
|ICICI Pru Nifty Next 50 Index - D (G)||20.6|
|Average (Nifty top 100)||18.0|
The top 6 funds outperformed Nifty 50. But they typically invest in top 100 not 50 stocks. So if I take right average. Nifty 50 and Nifty next 50, even best large caps don;t beat the index.
This is a quick exercise and I may have mad some errors. All links are updated and please feel free to correct and update me if any errors!