Large cap funds underperformed their benchmark over a five year period

Mid and small-cap funds and ELSS moderately outperformed their benchmarks whereas large-cap equities underperformed over a five-year period.

Majority of the large cap equity and debt funds have underperformed their respective benchmarks for the five year period ending June 30, 2014, says a Standard & Poor’s Indices Versus Active Funds (SPIVA) press release.

In the mid-year 2014, when S&P Indices - S&P BSE 100, S&P BSE 200 and S&P BSE Mid-Cap gained there was positive performance across all the segments of the market. Mid and small-cap funds and ELSS moderately outperformed their benchmarks whereas large-cap equities underperformed over a five-year period.

Equity Funds

Indian large cap equities: Almost two-thirds of the active funds in this category outperformed the S&P BSE 100 over a one year period. But over three and five year periods 60 % and 54 % of the Active funds underperformed the benchmark, respectively.

Indian Equity Linked Saving Schemes (ELSS): The majority of the active funds in this category outperformed the S&P BSE 200 in all the periods observed. The percentage of active funds that outperformed the benchmark over one, three and five year periods was 78%, 69% and 66% respectively.

Indian mid and small cap equities: The percentage of active funds in this category that outperformed the S&P BSE mid cap over a one year time period was 55%. Over three and five year periods, the percentage of funds outperforming the benchmark was 68% and 61%, respectively. The five year survivorship rate was only 77%.

Debt Funds

Indian government bonds: Almost 60% of the active funds in this category underperformed the S&P India Government Bond Index over the one year period. The percentage of funds underperforming the benchmark increased as the time period increased, with 64% and 78% of the active funds underperforming over three and five years, respectively.

Indian Composite Bonds: More than 70% of the active funds in this category beat the S&P India Bond Index over the one year period. Over three and five year periods, the percentage of funds outperforming the benchmark was 62% and 47%, respectively.

While Indian composite bond funds outperformed their benchmark, Indian government bond funds underperformed their benchmark over the one-year time period. However, both these groups underperformed the benchmark over a period of five years.

Utkarsh Agrawal further adds, “The interest rate remained higher and impacted the active managers in the Indian government bond peer group which underperformed the S&P India Government Bond Index over one-, three-, five-year periods. Almost a quarter of the funds in this peer group disappeared over the five-year period. Active managers in the Indian composite bond category also could not outperform the benchmark in the five-year period.”

Percentage of funds outperformed by the benchmark

Source: S&P Dow Jones Indices data as on June 2014