Last Updated on December 29, 2021 at 11:55 am
The fall in the markets over the last few weeks gives us a small window of opportunity to learn about risk in mutual funds. In this post, I list the funds and fund categories that fell the most and those that fell the least between Aug 28th 2018 and October 14th 2018. Although this is a small period, I think it is important for new investors to understand what they are in for.
The data is sourced from Value Research and all returns are absolute (percentage difference in NAV) and not annualized. We will consider diversified equity funds and hybrid funds and use the following fund category codes.
- HY-AH Hybrid Aggressive (min 65%-80% in stocks + bonds)
- HY-AR Hybrid Arbitrage (arbitrage + small amt of bonds)
- HY-BH Balanced Hybrid (40-60% stocks with no arbitrage)
- HY-CH Conservative Hybrid (10-25% stocks and rest in bonds)
- HY-DAA Dynamic asset allocation aka Balanced Advantage (variable stock and bond exposure)
- Hy-EQS Equity Savings (min 65% equity much of it will be arbitrage)
- HY-MAA Multi-Asset allocation (min three asset classes with 10% min exposure in each)
- EQ-ELSS – tax saving funds
- EQ- L&MC min 35% large cap + 35% midcap stocks
- EQ-LC min 80% large-cap stocks
- EQ-MC min 65% in midcap stocks
- EQ-MLC multi-cap funds no cap restrictions
- EQ-SC min 65% small cap stocks
- EQ-VAL follows a value investment strategy
So this is the period we are looking at
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List of equity funds that fell the most (top 15)
| Fund | Category | Return (%) |
| BOI AXA Large & Mid Cap Equity Fund – Direct Plan | EQ-L&MC | -17.27 |
| BOI AXA Tax Advantage Fund – Direct Plan | EQ-ELSS | -17.25 |
| Motilal Oswal Midcap 30 Fund – Direct Plan | EQ-MC | -16.96 |
| Aditya Birla Sun Life Equity Advantage Fund – Direct Plan | EQ-L&MC | -16.18 |
| HSBC Small Cap Equity Fund – Direct Plan | EQ-SC | -16.09 |
| JM Core 11 Fund – Direct Plan | EQ-LC | -15.38 |
| Tata Retirement Savings Fund – Progressive Plan – Direct Plan | EQ-MLC | -15.14 |
| Baroda Pioneer ELSS 96 Fund – Direct Plan | EQ-ELSS | -15.06 |
| Baroda Pioneer Midcap Fund – Direct Plan | EQ-MC | -14.89 |
| DHFL Pramerica Midcap Opportunities Fund – Direct Plan | EQ-MC | -14.82 |
| IIFL Focused Equity Fund – Direct Plan | EQ-MLC | -14.64 |
| Invesco India Multicap Fund – Direct Plan | EQ-MLC | -14.62 |
| Canara Robeco Emerging Equities Fund – Direct Plan | EQ-L&MC | -14.54 |
| Aditya Birla Sun Life Small Cap Fund – Direct Plan | EQ-SC | -14.39 |
| Edelweiss Mid Cap Fund – Direct Plan | EQ-MC | -14.37 |
Now, I won’t read too much into this table, just have a look and move on. There are many funds which fall in the -14% category.
List of equity funds that fell the least (top 15)
| Fund | Category | Return (%) |
| JM Large Cap Fund – Direct Plan | EQ-LC | -4.21 |
| Quantum Long Term Equity Value Fund – Direct Plan | EQ-VAL | -5.71 |
| Quantum Tax Saving Fund – Direct Plan | EQ-ELSS | -6.07 |
| ICICI Prudential Large & Mid Cap Fund – Direct Plan | EQ-L&MC | -7.19 |
| ICICI Prudential Focused Equity Fund – Direct Plan | EQ-MLC | -7.36 |
| ICICI Prudential Value Discovery Fund – Direct Plan | EQ-VAL | -7.53 |
| Indiabulls Value Discovery Fund – Direct Plan | EQ-VAL | -8.11 |
| HDFC Retirement Savings Fund Equity Plan – Direct Plan | EQ-MLC | -8.23 |
| Quant High Yield Equity Fund – Direct Plan | EQ-MLC | -8.65 |
| HDFC Top 100 Fund – Direct Plan | EQ-LC | -8.76 |
| IDBI Diversified Equity Fund – Direct Plan | EQ-MLC | -8.97 |
| HDFC Taxsaver Fund – Direct Plan | EQ-ELSS | -8.98 |
| HDFC Focused 30 Fund – Direct Plan | EQ-MLC | -9.05 |
| ICICI Prudential BHARAT 22 FOF – Direct Plan | EQ-LC | -9.34 |
| SBI Large & Midcap Fund – Direct Plan | EQ-L&MC | -9.47 |
Now, keep an eye on these funds and study their long-term downside protection when this month’s freefincal mutual fund consistency screener is published. Not too surprised Quantum Long Term Equity and its ELSS fund top the list. This is a fund that people hate during bull runs and love during bear runs. Few of us love it at all times.
List of hybrid funds that fell the most (top 15)
| Fund | Category | Return (%) |
| Tata Young Citizens Fund – Direct Plan | HY-BH | -14.38 |
| BOI AXA Mid & Small Cap Equity & Debt Fund – Direct Plan | HY-AH | -12.81 |
| Tata Retirement Savings Fund – Moderate Plan – Direct Plan | HY-AH | -12.24 |
| LIC MF Children’s Gift Fund – Direct Plan | HY-BH | -11.21 |
| IDBI Hybrid Equity Fund – Direct Plan | HY-AH | -11.2 |
| HSBC Dynamic Asset Allocation Fund – Direct Plan | HY-DAA | -10.8 |
| DSP Equity & Bond Fund – Direct Plan | HY-AH | -10.67 |
| Quant Opportunities Fund – Direct Plan | HY-AH | -10.53 |
| HSBC Managed Solutions India – Growth – Direct Plan | HY-AH | -10.53 |
| ICICI Prudential Advisor Series-Passive Strategy Fund – Direct Plan | HY-BH | -10.32 |
| Axis Children’s Gift – Direct Plan | HY-BH | -10.13 |
| Kotak Equity Hybrid Fund – Direct Plan | HY-AH | -10.04 |
| Baroda Pioneer Hybrid Equity Fund – Direct Plan | HY-AH | -10.03 |
| LIC MF Unit Linked Insurance – Direct Plan | HY-AH | -9.95 |
| Axis Triple Advantage Fund – Direct Plan | HY-MAA | -9.41 |
Again let us not read too much into this, although I am surprised to see Axis Triple Advantage in this list. The MAA category should not fall this much!! There are too many balanced hybrid funds here. Probably means that there are actually aggressive hybrid funds? Notice that these hybrid funds only fell a notch lower than diversified equity funds. This is important to keep in mind and one of the reasons why I keep saying treat these funds as pure equity funds.
List of hybrid funds that fell the least (top 15)
| Fund | Category | Return (%) |
| L&T Conservative Hybrid Fund – Direct Plan | HY-CH | -1.92 |
| DHFL Pramerica Hybrid Debt Fund – Direct Plan | HY-CH | -1.91 |
| Essel Regular Savings Fund – Direct Plan | HY-CH | -1.75 |
| Franklin India Life Stage Fund of Funds 50s Plus – Floating Rate – Direct Plan | HY-CH | -1.64 |
| SBI Multi Asset Allocation Fund – Direct Plan | HY-MAA | -1.49 |
| ICICI Prudential Regular Savings Fund – Direct Plan | HY-CH | -1.43 |
| ICICI Prudential Advisor Series-Conservative Fund – Direct Plan | HY-BH | -1.12 |
| Reliance Hybrid Bond Fund – Direct Plan | HY-CH | -1.09 |
| HSBC Managed Solutions India – Conservative – Direct Plan | HY-CH | -0.95 |
| Quantum Multi Asset Fund – Direct Plan | HY-MAA | -0.82 |
| DSP Dynamic Asset Allocation Fund – Direct Plan | HY-DAA | -0.79 |
| ICICI Prudential Equity Savings Fund – Direct Plan | HY-EQ S | -0.77 |
| Kotak Asset Allocator Fund – Direct Plan | HY-CH | -0.59 |
| Union Equity Savings Fund – Direct Plan | HY-EQ S | -0.5 |
| ICICI Prudential Advisor Series-Hybrid Fund – Direct Plan | HY-CH | 0.78 |
Notice that there are only two so-called Equity savings funds. Beware of this category! The problem is that people expect aggressive hybrid funds to only fall this much. This is ignorance.
Category-wise fall in equity funds
There is not much one can infer from this. Across categories, the extent of the fall has been similar other than few exceptions on the higher and lower side.
Category-wise fall in hybrid funds
- Arbitrage funds would give small positive in pretty much window – bull or bear. So don’t worry about that.
- Notice how risk equity savings funds are. Beware of these! Do not use for short-term goals
- It is disturbing that the spread in the fall for hybrid funds is higher than for equity funds. This means a huge difference in fund management style – the single most important reason why you should ignore star ratings. No point comparing apples and oranges and offering apples, 3-stars and oranges, 5-stars
- The spread in the conservative hybrid category especially is disturbing visually.
- Also, the multi-asset category is equally disappointing to me. Funds that hold equal amounts of three asset classes at all times would have fallen less. The trouble is the multi-asset category also dynamically asset allocates.
- If I must make any conclusion from this graph alone (not a great idea, but I am willing to bet that it should a reasonable guess at best), I would say, arbitrage funds and aggressive balances funds are a lot more homogenous in terms of investment style. This is crucial because if we start comparing funds with each other, they must be similar in nature, if not the same. That this is rarely the case, is what many mutual fund investors fail to recognise.
My fund fell the most! What should I do?
- Just ensure that you have chosen the right category and then the right fund for your need.
- Understand that such falls are common.
- Nothing else. Do not worry about this.
My fund fell the least! What does it mean?
- Nothing! Could be sheer dumb luck in most cases, unless you wanted a fund that protected the downside and your choice was vindicated.
- In any case, ensure that you have chosen the right category and then the right fund for your need.
- Understand that this may not happen during every fall and if it does not, it means little.
- Don’t let this get to your head!
Note: I don’t claim to have made some great analysis. This is only a crude representation of risk over a short time period. At best it serves to be cautious and temper expectations from our fund choices.
Use the freefincal monthly screener to be published next to hunt for funds with the best downside protection.
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