Listen to this article
At the Cafemutual Passives Conference 2025, SEBI WTM Amarjeet Singh revealed that 43% of direct plan equity schemes underperformed their respective benchmarks in the three years period ending February 2025. In terms of AUM, 29% of the AUM under direct plan equity funds underperformed during this period, he added.
Such underperformance was more prevalent in regular plans, with 67% of the total schemes—comprising 49% of the total AUM under equity funds—having underperformed their respective indices in the 3-year period ending February 2025, he added.
Singh said regular plans have a higher component of charges and fees, so underperformance becomes even sharper.
While the premise of active is attractive, and there are funds which outperform their respective benchmarks handsomely, data shows that it is a challenge to find such funds before they outperform, Singh added.
On the other hand, passive funds go by EMH, i.e., Efficient Market Hypothesis, which means the market reflects all known information to discover a price and hence, it becomes difficult to beat the market on a consistent basis, he added.
Singh said, research carried out in the US by Dr. Sir Francis Galton, in which he ran a competition where people were asked to guess the weight of an ox in 1906, illustrates this. Surprisingly, while no one guessed the weight of the ox correctly, the median weight guess of 787 people was nearly spot on. Markets, in many ways, reflect the so-called wisdom of collective intelligence, he added.
