92% of large-cap equity funds underperformed their benchmark indices in 2018: Report

Most of the large-cap equity funds and government bond funds underperformed their benchmark indices over the one-year period ending December 2018, says a report.

According to S&P Indices Versus Active (SPIVA) India scorecard, 92 per cent of the large-cap equity funds, 25.6 per cent of mid, small-cap equity funds and 81.6 per cent of government bond funds underperformed their respective indices over the one-year period ending December 2018.

The large-cap equity funds are compared to S&P BSE 100 index, while mid, small-cap equity funds to S&P BSE 400 mid, and small-cap index respectively.

"The large-cap equity funds witnessed a low survivorship rate (66.7 per cent) over the 10-year period and a low style consistency (42 per cent) over the one-year period ending December 2018," S&P Dow Jones Indices Associate Director, Global Research & Design Akash Jain said.

 

Over the 10-year period, the return spread for actively managed large-cap equity funds, between the first and the third quartile break points of the fund performance, stood at 3.4 per cent, pointing to a relatively large spread in fund returns.

In line with the historically volatile 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 5.3 per cent over the same period, the report said.

The asset-weighted return for large-cap equity funds was 72 bps higher than the equal-weighted return over the 10-year period. During the same period, the asset-weighted return of Indian equity mid, small-cap funds was 91 bps higher than their benchmark, the S&P BSE 400 mid small-cap index.

"Over three-year period, 88.1 per cent of ELSS Funds have underperformed their respective benchmarks and the return spread between the first and third quartile break points of the fund performance was 3.7 per cent over the 10-year period," it said.

The SPIVA India Scorecard reports on the performance of actively managed Indian mutual funds compared to their respective benchmark indices over one, three and five-year investment horizons.