Shift 20-25% of your equity fund exposure to passively-managed funds

A variety of factors have led to the underperformance by actively-managed large-cap funds

If you review the performance of large-cap funds over the past one year, actively-managed funds in this category have underperformed passive funds. These funds have given a category average return of -2.98 per cent. Among passive funds, Sensex-based exchange traded funds (ETFs) have given a return of 7.46 per cent, while Nifty-based ETFs have given 4.62 per cent (see table: Declining fortunes). A similar trend of underperformance by large-cap active funds is visible over the three-year horizon.

Outperforming vis-a-vis the total return index is also proving difficult. “Earlier, their performance against a price return index – Sensex or Nifty. Now they