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88% of large-cap funds underperformed benchmark in 12 months to June 2018: Report

The asset-weighted return for large-cap equity funds was 51 bps higher than the equal-weighted return over the 10-year period

October 22, 2018 / 06:51 PM IST

The latest S&P Indices Versus Active (SPIVA) India Scorecard reveals over the one-year period ending June 30, 2018, 88 percent of large-cap  equity funds, 62 percent of mid-/small-cap equity funds, and 83 percent of government bond funds underperformed their respective indices, according to data produced by Asia Index Private, a joint-venture between BSE and S&P Dow Jones Indices.

Asia Index Private released SPIVA India mid-year 2018 results.

The S&P BSE 100 ended the one year period in the black, returning 12.94 percent, with 88 percent of funds underperforming the benchmark. Over the 3-, and 10-year periods ending June 2018, 78 percent and 63 percent of large-cap equity funds underperformed the S&P BSE 100, respectively.

Large-cap funds witnessed low style consistency over the 1-year period, at 42 percent, and a low survivorship rate of 68 percent over the 10-year period.

Akash Jain, Associate Director, Global Research & Design, Asia Index Private Limited said, “The large-cap equity funds witnessed a low survivorship rate (68 percent) and a low style consistency (13 percent) over the 10-year period ending in June 2018.”


The SPIVA India Scorecard compares the performance of actively managed Indian mutual funds with their respective benchmark indices over 1-, 3-, 5-, and 10-year investment horizons. In this scorecard, SPIVA studied the performance of three categories of actively-managed equity funds and two categories of actively-managed bond funds over the 1-, 3-, 5-, and 10-year periods ending in June 2018.

“Since the turn of the year, the Indian market has weathered headwinds, tackling a depreciating Indian rupee and a deteriorating current account deficit partially on account of sticky oil prices,” SPIVA noted in its report.

“It also witnessed notable developments such as the introduction of the long-term capital gains tax in the last annual budget and the style re-categorisation mandates for funds domiciled in India,” the report added.

Over the 10-year period, the return spread for actively managed large-cap equity funds, between the first and the third quartile breakpoints of the fund performance, stood at 3.6 percent, pointing to a relatively large spread in fund returns.

In line with the historical volatility nature of the mid-/small-cap segment of the Indian equity market, the return spread for actively managed mid-/small-cap equity funds was even higher at 5.1 percent over the same period.

The asset-weighted return for large-cap equity funds was 51 basis points (bps) higher than the equal-weighted return over the 10-year period. In contrast, the margin between asset- and equal- weighted returns for ELSS funds was only 40 bps.

Over the three-year period ending in June 2018, the asset-weighted return of large-cap funds was 1.3 percent lower than their benchmark, the S&P BSE 100. During the same period, the asset-weighted return of indian equity mid-/small-cap funds was 3.1 percent lower than their benchmark, the S&P BSE 400 MidSmallCap Index.
Moneycontrol News
first published: Oct 22, 2018 06:51 pm

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