DSP Blackrock Investment Managers Pvt Ltd recently announced its decision to also measure performance of its schemes against a total return index (TRI), rather than just a price index. The management team at DSP Blackrock feels that this is a better way of benchmarking the excess returns generated by the fund managers, and there was no reason not to include this format. Here is what you need to know about the total return index.
What is it?
An index is a basket of securities taken at the prevalent market price. The change in value of this basket is the collective sum of the change in price of the securities in it.
Unlike a price index, a total return index considers both price changes and other payouts like dividends and interest to determine returns. Hence the term ‘total return’. Given that a mutual fund scheme’s return also includes both price changes and additional returns from payouts—like dividend—comparing this return to a total return index rather than just a price index is logical.
DSP Blackrock’s announcement applies to its actively managed equity funds, for which performance will now be measured against the total return index.
