This is a performance review of DSP Midcap Fund. This was started as a Small and Midcap when Blackrock was still part of DSP in Nov 2006 and was changed to a Midcap fund in March 2018. This has an impressive Aum of 6000+ Crores. We find out how it has performed with respect to its peers and benchmark.
We must take its past performance with some context as it earlier had the freedom to invest in any non-large cap stock (mid or small cap) up to 65% of the portfolio and large cap stocks up to 35%. Now it has to invest at least 65% in mid caps alone.
The fund selects stocks based on a bottom-up, stock–by–stock basis, looking at low price–to– earnings, price–to–book, price–to–sales ratios, incremental ROE and other factors. The portfolio will have a mix of both growth and value stocks.
DSP Midcap Fund: Peer Performance
Using the June 2019 Equity Mutual Fund Performance Screener, it is seen that DSP MIdcap fund has managed to beat NiftyMidcap150TRI index with 60% and above consistency over every possible 1,2,3,4 and 5 years since Jan 1st 2013.
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The rolling return outperformance consistency is defined as no of times the fund has beat the benchmark divided by the total no of data points. The table below compares the DSP Midcap fund with HDFC Midcap opportunities, L &T Midcap Fund and Kotak Emerging Equity. These are some of the best performing funds in the mid-cap category.
Upside performance consistency is a measure of how consistently the fund beats the benchmarks during months the benchmark has moved up and downside performance just the opposite: how consistent is the outperformance when the benchmark has moved down. Typically consistent outperformance will have good downside performance than upside. See: Strange, but true! How mutual funds beat the index!
DSP Midcap has been one of the top three performers in the mid cap space in term of consistently beating the benchmark over 1,2,3,4 and 5 years with good downside protection
This is the three-year rolling return performance of DSP Midcap fund versus Nifty Midcap 150 TRI Index. Although the fund has managed to beat the index over every possible 5 year periods, this is not the case over 3Y periods for the last couple of years. Since this has been the case for many funds in the category, it is not something to be overly worried about.
Summary
DSP Midcap fund has a good long term track record. Existing investors can certainly continue with the fund but must remain patient. New investors who can appreciate the risks associated with investing in midcaps can also consider the fund as part of a balanced, diversified portfolio for long term goals only
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