These funds have more or less the same exposure to sectors which equity diversified schemes have. Moreover they are underperforming, says a Morningstar study
Mumbai: Contra funds which are supposed to invest in ‘out-of-favour’ stocks have not been able to live up to their investment objective, shows a Morningstar India research report.
AUM
These funds managed Rs 4500 crore in December 2007 and their AUM slipped to Rs 2300 crore in December 2008. As on March 2011, these funds are managing close to Rs 3600 crore. They are yet to raise their assets to the pre financial crisis period.
Performance
The first contra fund was launched by SBI MF in July 1999, called SBI Magnum Contra Fund. Following the success of this fund there was a rush of such funds from 2005 to 2007. SBI Magnum Contra, however, has not been able to keep up to its star performance lately. It manages a corpus of about Rs 3,205 crore at the end of April 2011, which accounts for over 85% of overall assets of all contra funds.
The study shows that seven contra funds delivered an average return of 3.66% over a year (ended May 24 2011), significantly underperforming the Sensex, which returned 9.37% over the same period. Equity diversified funds, on the other hand, have generated 6% return during the same period. Similarly, over a five year period, contra funds have delivered an average of 8% return while equity diversified funds have posted an average of 10% return.
|
Table 1: Performance Analysis of Contra Funds (All Returns in % as of 24-May-2011) | ||||||
|
Fund Name |
Morningstar Overall Rating |
Morningstar Category |
YTD |
1 Year |
3 Years |
5 Years |
|
|
||||||
|
ING Contra Gr |
3 |
India OE small/Mid Cap |
-12.75 |
-0.13 |
5.41 |
10.30 |
|
Kotak Contra Gr |
3 |
India OE Large Cap |
-14.07 |
0.81 |
5.16 |
8.65 |
|
L&T Contra Gr |
1 |
India OE Large Cap |
-13.07 |
4.79 |
-5.20 |
-0.08 |
|
Religare Contra Gr |
4 |
India OE Large Cap |
-8.98 |
5.94 |
12.17 |
|
|
SBI Magnum Sector Umbrella Contra Gr |
4 |
India OE Large Cap |
-12.85 |
0.93 |
3.64 |
11.72 |
|
Tata Contra Gr |
3 |
India OE small/Mid Cap |
-7.21 |
13.55 |
7.72 |
10.42 |
|
UTI Contra Gr |
3 |
India OE Large Cap |
-14.16 |
-0.31 |
5.77 |
6.86 |
|
Average of Contra Funds |
-11.87 |
3.66 |
4.95 |
7.98 | ||
|
|
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