These Funds have delivered Consistence out-performance among equity MF’s
With another calendar year coming to end, it would be easy to sit and identify equity mutual funds which have topped the charts over this period. However, smart investors would know better than to draw any conclusion from this data. Evaluating fund performance over such a short time frame are sure to mislead investors into ‘flavor of the season’ schemes. A more nuanced approach would be to identify the funds which have outperformed over a longer period, say 3 or 5 years. A five year horizon is reasonable time to judge an equity fund’s performance.
However, even this approach has its limitations, considering how the broader markets have spiked since the General Elections in 2014. Since the 3 or 5 year returns are based on a fund’s most recent NAV, it is possible it may have done well on the shoulders of the recent market rally, thereby lending a gloss to its overall performance over the entire 5-year time frame. To counter this seasonality in performance, it would be wise of investors to check whether the fund has consistently stayed ahead of peers over these years.
In ET Wealth’s analysis of 190-odd diversified equity funds, around 60 schemes have managed to beat both benchmark and category across 3 and 5 year time periods. But only 10 of these have managed to beat their peers in their respective categories for each of the past five years, beginning 2011. This consistency in outperformance clearly makes these funds worthy investments for all seasons. Among the mid-cap funds, only one scheme—Mirae Asset Emerging Bluechip— has beaten its category average for each of the past five years. The fund’s pedigree is also evident from the degree of outperformance over its benchmark and peers. Across both time frames, the fund has delivered 15% higher CAGR than its benchmark while also yielding around 6% extra CAGR over the category average.
Other noteworthy performances in this category include SBI Small & Midcap, Franklin India Smaller Companies and Canara Robeco Emerging Equities. In the multi-cap category, six schemes have achieved this distinction—Birla Sun Life India GenNext, Birla Sun Life Pure Value, Franklin India Flexi Cap, Franklin India Prima Plus, Kotak Select Focus and Mirae Asset India Opportunities. Among these schemes, Birla Sun Life Pure Value has delivered the highest outperformance, but accompanied by a degree of volatility. The scheme follows a distinct value investing strategy, buying into stocks that are trading for less than their intrinsic value.
Axis Long Term Equity, steered by Jinesh Gopani, has delivered the highest outperformance relative to the benchmark across 3 and 5-years and also boasts the best risk-reward profile and lower volatility in this category. This fund is also a relative newcomer in the industry. A purely growth-oriented fund, it has a distinct quality bias in its stock picks. HDFC Bank, Kotak Mahindra Bank and Tata Consultancy Services are the top bets in its portfolio as of November-end. While none of the large-cap schemes managed to outperform in each of the past five years, funds like SBI Bluechip and BNP Paribas Equity delivered big outperformance’s over the benchmark and category average across 3 and 5-year time periods.
Credit By Sanket Dhanorkar ET Bureau