Multicap funds rule the roost in PMS ranking as largecap returns remain subdued

Even in top 30 funds, such names are just four, highlighting that best funds also tend to be more established ones.

Green Lantern Capital’s Growth Fund has topped the portfolio management services (PMS) fund ranking, thanks to its consistency and the alpha generated over the benchmarks, a QRC (Quality, Risk, Consistency) analysis by PMS AIF World, an investment services company, has shown.

The smallcap fund is followed by five multicap funds – Sameeksha Capital’s Equity Funds, Abakkus’ All Cap Approach, ICICI Prudential’s Contra Strategy, Buoyant Capital Opportunities Multi-cap, and 360 ONE’s Phoenix Portfolio which have made their investors happy with stellar performance.

Among the top 10 names, only one fund – Green Lantern’s Growth Fund – has assets under management (AUM) of less than Rs 500 crore. Rest are relatively more established, with Abakkus’ All Cap managing the highest, over Rs 3,500 crore.

Even in the top 30 funds, such names are just four, highlighting that the best funds also tend to be more established ones. This contradicts the recent trend when smaller funds keep outperforming their larger peers. However, they have been inconsistent to a large degree with new names topping the chart every month, with very few repetitors in the top 10.

The outperformance of multicap funds and mid and smallcap funds in the ranking is not surprising given the market segment has given superior returns recently. Most multicap funds are now focussing on small and midcap stocks.

Ranking methodology

The QRC is a proprietary work of PMS AIF World, which considers factors like outperformance compared to multiple indices, risk-adjusted returns, consistency of returns and other such parameters.

The analysis uses something called information ratio (IR) to rank funds, which is a measure that throws light on the fund manager’s ability to generate sustainable excess returns or abnormally high returns over a period of time, adjusted for risks. It is calculated by deducting the benchmark rate of returns from the portfolio rate of returns and then dividing it by tracking error, is the standard deviation of such an investment portfolio's excess returns with respect to the benchmark.

Other funds that feature in top 10 are Carnelian Capital’s Shift PMS, Abakkus’ Emerging Opportunities Approach, Nine Rivers Capital’s Aurum Small Cap Opportunities and ValueQuest’s Platinum Scheme,

The ranking has been made based on data as of September-end and uses higher weights for longer duration returns.

Future trend?

After a superior performance of small and midcap stocks, some investors are now becoming cautious with the segment as they believe valuations have overshot fundamentals in several sectors and pockets.

A report by Elara Securities recently pointed out that FIIs have not put “incremental flows” into India midcaps since August 2023, a break from the earlier trend. Though domestic flows have kept the small and midcap indices afloat.

If domestic flows also turn against the broader market, then we will likely see a shift in the composition of stocks that PMS funds hold.

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