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Year-end Special: Only 4% equity mutual funds generated positive alpha in 2018

Around 80 per cent equity mutual fund schemes failed to beat their respective benchmarks in the last year. Not spooked enough? Read this: merely eight out of a total of 182 equity mutual funds could generate positive alpha for their investors in the last one year. Alpha is the excess returns made by an investment against its benchmark.

See table below for the schemes which generated positive returns over their respective benchmarks for their investors. You can easily make out that schemes of Axis Mutual Fund fared comparatively much better than the schemes of other AMCs.

For more, read :
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Some challenges will continue in 2019, says Jinesh Gopani of Axis Mutual Fund

Scheme Name
1-Yr fund return
1-Yr benchmark return
1-Yr out-performance
Axis Multicap Fund Multicap 6.32 NIFTY 500 – TRI -2.49 8.80
Axis Bluechip Fund Largecap 6.02 NIFTY 50 – TRI 3.95 2.07
UTI Equity Fund Multicap 3.97 S&P BSE 200 – TRI 0.35 3.62
Axis Midcap Fund Midcap 3.23 S&P BSE Mid-Cap – TRI -12.39 15.62
Axis Long Term Equity Fund ELSS 2.86 S&P BSE 200 – TRI 0.35 2.50
Quant Small Cap Fund Smallcap 2.58 Nifty Smallcap 250 -26.64 29.23
Canara Rob Bluechip Equity Fund Largecap 2.30 S&P BSE 100 – TRI 2.00 0.30
ICICI Pru LT Equity Fund ELSS 0.16 NIFTY 500 – TRI -2.49 2.64

Source: Ace MF

To break down further, only six per cent largecap schemes, four per cent midcap, six per cent multicap funds, six per cent smallcap and five per cent tax-saving schemes could outperform their respective benchmarks and offer positive returns.

Large & midcap funds and focused funds failed to generate positive alpha for their investors.

How we did this?
We started with equity schemes which have completed one year. We included regular plans of largecap schemes, midcap schemes, large & midcap, multicap, smallcap, tax-saving or ELSS and focused equity funds in this study.

There were a total 182 such schemes. Next, we took out those schemes which have outperformed their respective benchmarks in the last one year. Out of the 182 schemes, only 37 schemes could outperform their benchmarks.

The readers must understand that outperformance does not mean positive returns. If a scheme is giving lower negative returns than its benchmark, that is also called an outperformance.

Next, out of the 37 schemes, we filtered those schemes which have generated positive returns in the last one year. This gave us the schemes which have generated a positive alpha.

Investors must take this as an informational piece and not an advice to invest or not to invest in any mutual fund schemes. One year is too short a horizon to invest in an equity scheme. You must have at least five to seven years in hand while investing in an equity mutual fund.


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