Did equity fund investors actually make money in 2020?

On a yoy basis, the Nifty is up 14.1%; which is fabulous by any benchmark.

Dec 10, 2020 09:12 IST India Infoline News Service

The last one year was tumultuous for Nifty and Sensex. However, on a yoy basis, the Nifty is up 14.1%; which is fabulous by any benchmark. Check the chart.

Data Source: NSE

Investors in equity funds would be inclined to believe that 2020 must have been a phenomenal year. The Nifty was up 14.1% over last year. In addition, Nifty corrected all the way down to 7,610 and bounced 77% to new highs. For active equity fund managers, that is a windfall of passive returns and volatility.

Fund returns are not investor returns

Why do active equity funds underperform the index? Quite often, the outperformance hardly justifies the effort and cost of active management. A good number of mutual funds in a particular category may have done well but as share of AUM they may not be material. To capture these trends, we evaluate 1-year returns of 4 categories of equity funds. The fund will be treated as an outperformer only if it beats the benchmark by over 100 basis points.

How large cap funds performed in last one year?
Scheme
Name
Return 1 Year (%) Regular Return 1 Year (%) Benchmark Outperformance Spread (%) Daily AUM
(Rs. in Crore)
Canara Robeco Bluechip 19.30 14.40 4.90 1,197.77
UTI Mastershare Fund 16.44 14.40 2.04 7,215.15
Axis Bluechip Fund 15.36 13.42 1.94 21,057.45
JM Large Cap Fund 15.55 13.99 1.56 367.45
Data Source: AMFI
Here are the key takeaways from the analysis of large cap funds.
  • Out of 29 large cap funds in India, only 4 funds earned over 100 basis points more than the index. In numerical terms, that is just about 14% of the funds outperforming.
  • Now for significance of outperformance. The 4 outperforming funds had combined AUM of Rs29,838cr. That means; 17.8% of the large cap fund AUM of Rs167,305cr actually outperformed the benchmark index.
 
How multi-cap funds performed in last one year?
Scheme
Name
Return 1 Year (%) Regular Return 1 Year (%) Benchmark Outperformance Spread (%) Daily AUM
(Rs. in Crore)
Quant Active Fund 36.17 15.73 20.44 106.77
PGIM Diversified Equity Fund 34.02 15.73 18.29 432.78
Parag Parikh LT Equity Fund 30.73 15.73 15.00 5,953.43
UTI Equity Fund 26.74 15.73 11.01 13,872.92
Canara Robeco Equity Fund 19.43 16.23 3.20 2,885.13
Baroda Multi Cap Fund 17.36 16.23 1.13 936.77
Union Multi Cap Fund 17.36 16.23 1.13 428.10
Data Source: AMFI
Here are the key takeaways from the analysis of multi-cap funds.
  • Out of 34 multi-cap funds, 7 funds earned over 100 basis points more than the index. In numerical terms, that is about 21% of funds outperforming.
  • Now for significance of outperformance. The 7 outperforming funds had combined AUM of Rs24,616cr. That means; 14.9% of the multi-cap fund AUM of Rs164,838cr outperformed the benchmark index.
 
How mid-cap funds fared  in last one year?
Scheme
Name
Return 1 Year (%) Regular Return 1 Year (%) Benchmark Outperformance Spread (%) Daily AUM
(Rs. in Crore)
PGIM India Midcap Fund 48.52 23.11 25.42 516.29
Baroda Midcap 29.85 20.73 9.12 54.92
Quant Mid Cap Fund 34.66 25.67 8.99 21.84
UTI Mid Cap Fund 29.56 25.67 3.89 4,561.12
Edelweiss Mid Cap Fund 25.79 23.11 2.68 1,042.46
Axis Midcap 22.79 20.73 2.06 8,066.06
SBI Magnum Midcap Fund 27.38 25.67 1.70 4,168.29
DSP Midcap Fund 24.54 23.11 1.43 9,634.23
Mirae Asset Midcap Fund 24.31 23.11 1.20 3,089.07
Taurus Discovery (Midcap) 24.18 23.11 1.07 59.91
Data Source: AMFI
Here are the key takeaways from the analysis of mid-cap funds.
  • Out of 24 mid-cap funds, 10 funds earned over 100 basis points more than the index. In numerical terms, that is about 42% of the funds outperforming.
  • Now for significance of outperformance. The 10 outperforming funds had combined AUM of Rs31,214cr. That means; 31% of mid-cap fund AUM of Rs102,305cr outperformed the benchmark index.
 
How ELSS Funds fared in last one year?
Scheme
Name
Return 1 Year (%) Regular Return 1 Year (%) Benchmark Outperformance Spread (%) Daily AUM
(Rs. in Crore)
Quant Tax Plan 39.36 13.42 25.94 25.10
BOI AXA Tax Advantage 28.01 16.23 11.78 353.60
Parag Parikh Tax Saver Fund 25.69 15.73 9.96 89.59
Canara Robeco Equity Tax Saver 23.67 14.40 9.27 1,381.54
Mirae Asset Tax Saver Fund 19.72 14.60 5.12 5,204.59
IDFC Tax Advantage (ELSS) Fund 18.07 15.61 2.46 2,634.53
UTI Long Term Equity Fund 18.14 15.73 2.41 1,598.70
Axis Long Term Equity Fund 17.45 15.61 1.84 25,970.06
Union Long Term Equity 17.75 16.23 1.52 307.35
Data Source: AMFI

Here are the key takeaways from the analysis of ELSS funds.
  • Out of 38 ELSS funds, 9 funds earned over 100 basis points more than the index. In numerical terms, that is 24% of funds outperforming.
  • Now for significance of outperformance. The 9 outperforming funds had combined AUM of Rs37,565cr. That means; 34% of ELSS funds AUM of Rs111,448cr outperformed the benchmark index.
 
Key takeaways for investors
One trend that emerges is that outperformance is still a small chunk of the overall AUM. One way is to stick to the past performers to improve probability of positive returns. Mid-cap fund managers have overall done better than large caps and that could be due to Kurtosis effect. Lastly, ELSS funds have done exceptionally well as a category. This could be attributed to greater asset allocation flexibility and the 3-year lock-in.

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