The Mutual Fund Show: How Active Funds Fared Against Benchmarks

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Indian markets, after rising to a record in February, plunged following the Covid-19 outbreak, and have ever since gained by more than half. Yet, fund managers have been unable to outperform the benchmarks.

More than 48% of Indian equity large cap funds, 59% of ELSS funds and 82% of Indian composite bond funds underperformed their respective indices, in the one year through June 2020, according to the latest S&P Indices Versus Active India Scorecard, published in a report by S&P Dow Jones Indices.

“Pandemic related volatility shook the Indian equity markets in the first half of the year, however, the impact on various fund categories has been different,” Akash Jain, associate director of global research and design at S&P Dow Jones Indices, said on BloombergQuint’s weekly series The Mutual Fund Show.

“During this period more than 40% of funds in each of the equity categories underperformed their respective category benchmark whereas 37.5% of the Indian government bond funds and 92.16% of the Indian composite bond funds underperformed their respective benchmarks,” he said. The underperformance of fund managers also holds true in case of longer-term time horizons, shows the report.

“In this report, we see that if I were to pick up the large cap category, over a five-year period, more than 80% of the funds underperformed the S&P BSE 100 total returns index,” Jain said. Out of the 92 large cap funds in existence five years back, only 18 funds or roughly 20% survived and outperformed the S&P BSE 100, he said.

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