Should I Exit HDFC Mid-Cap Opportunities Fund?

Last Updated on December 28, 2019 at 11:33 am

Investors in HDFC Mid-Cap Opportunities Fund are worried about its recent drop in performance. Is this because of the fund manager or because of the overall slump in midcap stocks? We evaluate recent risk and reward of the fund with respect to its benchmark to find out what investors should do with the fund. Can new investors also consider this fund?

In our detailed review of the fund in Nov 2018, we had pointed out the recent slump in performance and that a new investor should temper expectations from the fund. Let us now look at its recent performance. DIY investors can easily perform a similar analysis with any fund.

HDFC Mid-Cap Opportunities Fund vs Nifty Midcap 100 – TRI

Let us first compare the returns of the fund with its benchmark over different durations. Returns below one year are absolute and above are annualised.

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Duration	Fund	Index
1 Month	0.54	-0.09
3 Months	1.22	1.38
6 Months	-2.08	-2.19
9 Months	-2.75	-4.20
2 Months	2.88	4.30
4 Months	7.52	8.23
5 Months	5.26	4.63
7 Months	-2.54	-4.04
8 Months	-3.06	-4.15
10 Months	5.38	2.52
11 Months	3.97	0.01
1 Year	1.77	-3.25
2 Years	-5.29	-9.17
3 Years	10.02	7.34
4 Years	9.74	7.19
5 Years	9.51	7.77

Notice that every time the index has given a negative return, the fund has given a lesser negative return. This is prominent, especially over 1 and 2 years. The fund appears to have turned things around in the last year.

Next, we consider the up and down capture ratios. The up capture ratio is defined as how much of the benchmark’s gains has the fund “captured” each time the benchmark moved up over a month.

While an up capture ratio of more than 100% would intuitively be desirable, most consistent long-time performers do not move up more than or even as much as the index during market upswings. See: Strange, but true! How mutual funds beat the index!

The down capture ratio has a corresponding definition with respect to benchmark losses. A down capture ratio of less than 100% is desirable as this means the fund has lost less than the benchmark consistently.

2017-Dec-26 To 2019-Dec-26
Up	Down
81.95	80.66
2016-Dec-26 To 2019-Dec-26
Up	Down
90.56	79.59
2016-Dec-26 To 2017-Dec-26
Up	Down
83.22	55.11
2017-Dec-26 To 2018-Dec-26
Up	Down
82.55	78.54
2018-Dec-26 To 2019-Dec-26
Up	Down
74.05	81.58

The fund has an excellent downside capture ratio with reasonably strong upside performance. This means it tends to protect investors during turbulent periods such as the present.