If the Employees’ Provident Fund Organization (EPFO), which began investing in equities for the first time this year, had allocated money to actively managed funds, it may have got better returns. The annualized median returns for these funds were 2-7 percentage points higher than their benchmarks.
EPFO allocated capital to passively managed exchange-traded funds (ETFs) which track benchmark indices. It recently expressed disappointment with limited returns so far over a three-month period, which in any case is too short a period to be looking at equity returns.
But even over a longer time period, actively managed funds have done better in India. For example, if EPFO had allocated Rs.5,000 crore 10 years ago to a passive equity fund with the same constituents as an index, it would have grown toRs.14,823.12 crore now, assuming an annual 11.48% return. In actively managed funds, the corpus would have grown to Rs.19,013.07 crore (assuming median return of 14.29% per annum).
