I post a fund reviews from time to time in order to showcase the capabilities of my Excel sheets to new readers. The focus in these posts is on 'how to review/analyze a fund' rather than the results of the review. The fund chosen is just an excuse.
In this case, it is Edelweiss Absolute Return Fund. This is an equity-oriented 'balanced' fund or 'hybrid' fund. Its main aim is to reduce the volatility in NAV movement, but at the same time aim for capital appreciation by using a wide variety of instruments:
Equity and equity-related instruments like derivatives, arbitrage opportunities, stock lending, option premium, interest swaps, foreign securities, bonds, money market instruments and securitised debt (whew!)
In spite of all this, it is considered as a high risk fund (brown color code) but is curiously benchmarked to CRISIL MIP blended index which is a debt oriented folio (15% Nifty+85% CRISIL composite bond index)
Naturally the expense ratio of such a fund will be high.
In what follows I compare the performance of the fund with Nifty (because I suspected that it would have done well wrt this) using the
and with HDFC Balanced with the
Fund A vs. Fund B risk-return analyzer and
Fund A vs. Fund B. rolling returns calculator
We will be using metrics like Ulcer index and Capture ratio. Please refer to these posts for more details:
Mutual Fund Analysis With the Ulcer Index
Simplify Mutual Fund Analysis with Upside/Downside Capture Ratio
First a look at the risk-adjusted return with multiple metrics. The fund has done quite well.
Now the SIP and lump sum returns (click to enlarge)
This a pretty good showing. The fund has managed to match or even beat the Nifty by taking lesser risk. The best way to visualize that is by looking at the normalized NAV movement along with the Ulcer index (a measure of downside risk)
The Ulcer index of the fund (blue line) is well below that of the index (burgundy line) and is a lot less volatile. Notice how smooth the NAV has increased (green) compare to the index (purple).
The capture ratio of the fund (upside capture divided by downside capture) is also well above the index. This is an impressive record.
Edelweiss Absolute Return Fund vs. HDFC Balanced
Now let us compare this fund with a solid 'traditional balanced fund like HDFC balanced.
A consistent score of less than 50% implies that Edelweiss Absolute Return Fund has not done well compared to HDFC balanced on risk-adusted basis. The returns also reflect this (click to enlarge).
HDFC balanced has returned significantly more.
However, the higher returns of HDFC balanced has come with significant volatility as seen by higher ulcer index (burgundy).
Have a look at the 5 year rolling returns of both funds. HDFC balanced is superior.
That said, if I had to choose a fund for a goal between 5-10 years, I will use Edelweiss Absolute Return fund and not HDFC balanced.
HDFC balanced is simply too volatile for less than 10Y durations.
Do not make the mistake of using Edelweiss Absolute Return fund for short-term goals (1-3Y). Both funds are too volatile for such time periods.
Have a look at 1Y rolling returns.
and 2Y rolling returns
The returns will be too volatile for short durations.
At the same time, this fund is too conservative to be suitable for long-term goals (10Y+).
Verdict: Suitable for intermediate-term financial goals with adequate (separate) debt exposure.
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Sir, I think Edelweiss Absolute Return Fund should be compared with Icici Pru Balanced Advantage.
Yes, I see what you mean. I dont think results will be any different. This fund has higher arbitrage and other exposure than ICICI balanced.
Sir, I was referring to I Pru Balanced Advantage. According to Morningstar it has effective exposure of 39% to equities currently.
But I have not looked into the investment strategies of both the funds. So will not be able to comment on arbitrage exposure.
Sir, I think Edelweiss Absolute Return Fund should be compared with Icici Pru Balanced Advantage.
Yes, I see what you mean. I dont think results will be any different. This fund has higher arbitrage and other exposure than ICICI balanced.
Sir, I was referring to I Pru Balanced Advantage. According to Morningstar it has effective exposure of 39% to equities currently.
But I have not looked into the investment strategies of both the funds. So will not be able to comment on arbitrage exposure.
Pattu Sir,
Whats the impact of Sharpe Ratio. Can you illustrate in this analysis
Sharpe ratio is best calculate wrt the funds benchmark. You can calculate it using the risk-return analyser and check for outperformance. I dont remember the values for this fund.
Pattu Sir,
Whats the impact of Sharpe Ratio. Can you illustrate in this analysis
Sharpe ratio is best calculate wrt the funds benchmark. You can calculate it using the risk-return analyser and check for outperformance. I dont remember the values for this fund.
Hi Pattu,
after attending your delhi workshop and reading this blog, i started using more features in it. i downloaded 15 oct 2014 mf portfolio tracker. i am unable to use it because:-
i have purchased FI prima fund - g -direct on 13.03.2014 for 10000/- and then started SIP wef 20 jul 2014 for 4000/-.
now if i go to 'input' file and put 13.03.2014 in step 5 and 20.07.2014 in step 7 then 4000 get invested on 13.03.2014 and then every month on 20 or later (if 2o is holiday) wef jul 2014, because there is no place to add amount 10000/- in input sheet.
if i put 21.07.2014 which is first SIP tx date (as 20 sep was holidy) in step 5 and 20.07.2014, then system warns that it is not permitted.
if i put 21.07.2017 in both step 5 & 7, all SIPs hapen on 21st instead of 20th.
please tell me how to go about
thanks
baljit
Hi Pattu,
after attending your delhi workshop and reading this blog, i started using more features in it. i downloaded 15 oct 2014 mf portfolio tracker. i am unable to use it because:-
i have purchased FI prima fund - g -direct on 13.03.2014 for 10000/- and then started SIP wef 20 jul 2014 for 4000/-.
now if i go to 'input' file and put 13.03.2014 in step 5 and 20.07.2014 in step 7 then 4000 get invested on 13.03.2014 and then every month on 20 or later (if 2o is holiday) wef jul 2014, because there is no place to add amount 10000/- in input sheet.
if i put 21.07.2014 which is first SIP tx date (as 20 sep was holidy) in step 5 and 20.07.2014, then system warns that it is not permitted.
if i put 21.07.2017 in both step 5 & 7, all SIPs hapen on 21st instead of 20th.
please tell me how to go about
thanks
baljit
Absolute Return Fund does nt change the long only equity position unlike the Pru Balanced Advantage fund ,instead it do dynamic hedging to manage risk/downside
Absolute Return Fund does nt change the long only equity position unlike the Pru Balanced Advantage fund ,instead it do dynamic hedging to manage risk/downside
Sir,
Please give an access to charts/graphs.
Unable to view them.
Thanks.
They are back on now. Thanks for letting me know.
Am from Gangtok in Sikkim. Long back - over 7-8 years now, an Edelweiss representative, tells me to invest in Edelweiss assuring me their "indepth knowledge" and "expertise" in "managing money" with their "meticulous plans" I said fine and put in Rs 10000 and another Rs 5000 as well later. In the interim period I started reading about Edelweiss's "expertise" in money management on their websites that is filled with fancy words and other high sounding words - I thought they are great people with great knowledge. In between I kept getting emails from Edelweiss which I didn't read in detail thinking "experts are on the job"
After those many years I got curious as to how my money must have "grown" with those "experts". They tell me my 15000 has become Rs 2667 which they had to put in my bank account as they didnt wan't to see it becoming even less. I couldn't help but smile at their "expertise" and their "indepth knowledge" and "capabilities" and just wonder how many others go through such “knowledgeable experts”