This article presents an outperformance consistency report of active mutual funds. This analysis was done for a SEBI-sponsored talk given to Tamil Nadu Investors Association Members on March 24th, 2024.
Disclaimer: Fund performance reports present return and risk analysis of a fund with representative benchmarks and not investment recommendations. It must be expressly understood that the data below reflect only past performance and is in no way an indication of future performance.
Rolling return outperformance consistency (aka performance consistency): Active fund returns are compared with category benchmark returns over every possible 5Y and 10Y period from Apr 2006 to March 2024. The higher the outperformance consistency, the better. Suppose 876 fund returns were compared with 876 benchmark returns, and the fund has beaten the benchmark 675 times. The consistency score will be 675/876 ~ 0.77 or 77%. A score of 1 means 100%.
Categories studies with benchmarks used
| Category | Benchmark |
| Aggressive Hybrid Fund | Crisil6535 |
| Contra | Nifty 100 TRI |
| Dividend Yield | Nifty 100 TRI |
| Equity Linked Savings Scheme | Nifty 200TRI |
| Flexi Cap Fund | Nifty 200TRI |
| Focused Fund | Nifty 200TRI |
| Large & Mid Cap | Nifty 200TRI |
| Large Cap Fund | Nifty 100 TRI |
| Mid Cap Fund | NiftyMidcap150TRI |
| Multi Cap Fund | Nifty 200TRI |
| Sectoral/ Thematic | Nifty 100 TRI |
| Sectoral/ Thematic (international) | Nifty 100 TRI |
| Small cap Fund | NiftyMidcap150TRI |
| Value Fund | Nifty 100 TRI |
Clarification:
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- Why are you comparing Small Cap Mutual Funds with a Mid Cap Index?!
- Many funds have changed strategy over the years. Despite this, they are sill expected to be representative category benchmarks with reasonable consistency.
Overall: 10-year periods; Regular Plan Funds vs Category benchmarks
- 168 funds across all categories with at least 500 10-year data points
- 78 funds (46%) with a performance consistency of 70% or more
- 87 funds (52%) with a performance consistency of 60% or more
Overall: 5-year periods; Direct Plan Funds vs Category benchmarks
- 277 funds across all categories with at least 500 5-year data points
- 96 funds (35%) with a performance consistency of 70% or more
- 123 funds (44%) with a performance consistency of 60% or more
Mid cap funds:
5-year periods; Direct Plan Funds vs Nifty Midcap 150 TRI
- 22 funds across all categories with at least 500 5-year data points
- 4 funds (18%) with a performance consistency of 70% or more
- 7 funds (32%) with a performance consistency of 60% or more
10-year periods; Direct Plan Funds vs Nifty Midcap 150 TRI
- 14 funds across all categories with at least 500 5-year data points
- 5 funds (36%) with a performance consistency of 70% or more
- 7 funds (50%) with a performance consistency of 60% or more
Small cap funds:
5-year periods; Direct Plan Funds vs Nifty Midcap 150 TRI
- 14 funds across all categories with at least 500 5-year data points
- 6 funds (43%) with a performance consistency of 70% or more
- 6 funds (43%) with a performance consistency of 60% or more
10-year periods; Direct Plan Funds vs Nifty Midcap 150 TRI
- 8 funds across all categories with at least 500 5-year data points
- 3 funds (37%) with a performance consistency of 70% or more
- 4 funds (50%) with a performance consistency of 60% or more
Flexicap Funds:
5-year periods; Direct Plan Funds vs Nifty 200 TRI
- 20 funds across all categories with at least 500 5-year data points
- 9 funds (45%) with a performance consistency of 70% or more
- 11 funds (55%) with a performance consistency of 60% or more
10-year periods; Direct Plan Funds vs Nifty 200 TRI
- 13 funds across all categories with at least 500 5-year data points
- 7 funds (54%) with a performance consistency of 70% or more
- 8 funds (61%) with a performance consistency of 60% or more
Focused Funds
5-year periods; Direct Plan Funds vs Nifty 200 TRI
- 15 funds across all categories with at least 500 5-year data points
- 6 funds (40%) with a performance consistency of 70% or more
- 8 funds (53%) with a performance consistency of 60% or more
10-year periods; Direct Plan Funds vs Nifty 200 TRI
- 10 funds across all categories with at least 500 5-year data points
- 5 funds (50%) with a performance consistency of 70% or more
- 5 funds (50%) with a performance consistency of 60% or more
Additional resources:
- Why are you not recommending mid cap and small cap funds?
- Poor performance of active mutual funds: Is this a recent development?
- Why we badly need an aggressive hybrid index fund!
Summary
- “Beating” the market is not easy!
- Only 45% to 55% of funds consistently beat the index in most categories. Selecting those funds is no guarantee of future outperformance.
- Investors are better off with passive funds: no fund manager risk, less fee, no performance anxiety, and time spent elsewhere. Ideally, a Nifty or Sensex index fund is enough.
- Active funds or passive funds are not a primary issue. We first need a proper financial plan.
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