DSP BlackRock Mutual Fund has today announced that it will disclose performance of its all its active equity funds with the Total Return Index (TRI), a benchmark that captures dividend income.
Unlike traditional benchmarks which do not take into account dividend income, TRI includes interest, capital gains, dividends and distributions realized over a given period of time. Simply put, TRI takes into account the dividend from companies, which is reinvested. Hence, TRI provides an apt measure to reflect the true alpha created by mutual funds.
With very few exceptions, the mutual fund industry generally showcases its performance against a benchmark. However, while the performance of the mutual fund scheme is a function of dividend as well as the capital gains made on investments, the returns on the benchmarks are considered without any dividend income.
Kalpen Parekh, President, DSP BlackRock Investment Managers believes that the move will help them reflect true picture of the performance of the fund. “The alpha that is shown currently may look overstated as dividends are not added in benchmark returns. At a time like this, when we are seeing very high flows, we want our investors to have a true picture of the alpha generated. We feel benchmarking to TRI is a step towards responsible and transparent communication with our advisors and investors and also sets high standards in investment management.”
Anup Maheshwari, EVP and CIO - Equities, DSP BlackRock Investment Managers said, “Total return determines an investment’s true growth over time. It is important to evaluate any fund’s performance against its total return benchmark to get the right perspective on the fund’s relative performance.”
