Effective 1 February 2018, your fund house will need to compare its schemes with the total returns index (TRI) of its benchmark index. Although it’s a small change that your fund house would need to put in place, you may see your mutual fund investments a little differently now. For instance, the difference in returns between your fund and its benchmark index fund may not look all that big, as it has happened so many times in the past. Does that mean your fund’s performance could suddenly turn sour? No, but you would need to taper your expectations a bit.
The difference
Mint checked some of BSE Ltd’s indices and the difference in the TRI and the Price Return index (PRI) that we’re used to seeing so often around us is around 1-2 percentage points. For instance, the S&P BSE Sensex returned 5.32% over the past 10-year period, while its TRI version returned 6.85% over the same time. Say, your fund returned 10% in the same time period. In the PRI system, your fund outperformed Sensex by around 4.7 percentage points. Under TRI, it would have outperformed by just 3.15 percentage points. That is still outperformance, but do you see how the outperformance has gone down overnight by just looking at things in a slightly different way?
