More than half of large cap Indian equity funds underperformed their benchmark: SPIVA report

The latest SPIVA (S&P Indices Versus Active) scorecard reveals that over a one-year period, ending June 30, 2017, 52.87 percent of large-cap equity funds, 56.52 percent of mid/small-cap equity funds and 73.83 percent of Indian composite bond funds under-performed their respective indices.

SPIVA Scorecard is produced by Asia index Private Limited, a joint venture between BSE and S&P Dow Jones Indices.

According to the report, as of June 2007, there were 118 large cap equity funds available for investment. Out of these 118 funds, 40 funds either merged or liquidated over the 10-year period ending June 30, 2017 resulting in a survivorship rate of 66 percent.

Additionally, 29 funds under-performed on the S&P BSE 100, in other words 59 percent of the funds under-performed the index.

Over a 10-year period, the return spread for the actively managed large-cap equity funds, between the first and the third quartile break points of the fund performance stood at 3.11 percent, pointing to a relatively large spread in fund returns.

Owing to the volatile nature of the mid-/small-cap segment of the Indian equity market, the return spread for the actively managed mid-/small-cap equity funds was even higher at 4.17 percent over the same period.

Asset-weighted return of large-cap equity funds was 79 basis points higher than the equal-weighted return, over the 10-year period.

In contrast, the margin between asset- and equal- weighted return for ELSS funds was only 17 basis points.

However, none of the peer groups had a 100 percent survivorship rate over the 10-year period. At 60.61 percent, mid/smallcap equity funds had the lowest rate of survivorship, whereas ELSS or equity linked savings schemes recorded the highest survivorship rate of 96.55 percent over the same 10-year period amongst equity fund categories.

Below is a table detailing the percentage of funds outperformed by their relative benchmark index

Source: S&P Dow Jones Indices LLC, Morningstar, and Association of Mutual Funds in India. Data as of June 30, 2017. Index performance based on total return INR. Charts and graphs are provided for illustrative purposes. Past performance is not an indication or guarantee of future results. These charts and graphs may reflect hypothetical historical performance

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