How did equity mutual funds perform in 2021?

Published: December 26, 2021 at 7:00 am

This article compares the 2021 performance of 367 actively managed equity-oriented mutual funds with category benchmarks. The 2021 performance refers to the 357-day absolute return from 1st Jan 2021 to 24th Dec 2021. All index returns refer to total returns (including dividends) unless otherwise stated.

Note: The goal of this study is just what is stated in the title – to see how active mutual fund managers have performed in 2021. None of these is investment recommendations. Selecting funds based only on recent past performance is one of the worst mutual fund investing mistakes.

We urge readers to appreciate the difference between looking at data as an analyst or curious observer and looking at data as an investor. In this article, we don the cap of a curious observer.

Aggressive Hybrid Funds: The CRISIL Hybrid 35+65 – Aggressive Index increased 18.2% in 2021, and the Nifty 50 TRI grew by 22.7%.

17 out of 34 funds beat the Nifty, and 30/34 funds beat the CRISIL index, which is a good performance.

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    Thematic Funds (miscellaneous): 35 out of 43 funds outperformed the Nifty.  Each fund in this category has its own benchmark. Out of the 7 ESG funds, only two outperformed the Nifty 100 ESG Index – TRI, which moved by 28.2% in 2021; five did better than the Nifty.

    Technology Funds: Funds from ICICI and SBI did better than S&P BSE Teck Index – TRI (47%). The fund from Franklin underperformed.

    Pharma and Healthcare: Three out of nine funds beat the S&P BSE Health Care – TRI (14.8%).

    Infrastructure:  All 18 funds beat the Nifty Infra TRI (34.9%)

    Banks & Financial Services: 7 out of 13 outdid the Nifty Financial Services – TRI (12.3%)

    FMCG/Consumption: All 11 funds did better than Nifty Consumption TRI (17.3%)

    Contra: All three contra funds underperformed NIFTY500 Value 50 – TRI (51.5%)

    Dividend Yield: 5 out of 7 funds beat the Nifty Div Opp TRI (30.56%)

    Value Funds: Only one out 15 managed to beat NIFTY500 Value 50 – TRI (51.6%)

    Small Cap: NIfty Small cap 250 TRI moved up by 55.3%. 15 out of 24 funds outperformed.

    Mid cap: Nifty Midcap 150 – TRI  returned 42.5%. 13 out of 26 funds did better. That is quite poor. Also, see: Myth Busted: Active mid cap mutual fund managers can easily beat the index.

    Multi cap:  The NIFTY 500 Multicap 50:25:25 TRI moved up by 35.9% in 2021. 7 out of 10 funds did better.

    Flexi cap: 16 out of 25 funds outperformed the Nifty 500 TRI (28.1%)

    Focused Funds: 15 out of 25 funds outperformed the Nifty 500 TRI (28.1%)

    ELSS: 29 out of 41 funds outperformed the Nifty 500 TRI (28.1%)

    Large and midcap funds:  19 out of 28 funds beat the Nifty LargeMidcap 250 Index – TRI (32.8%)

    Large cap: 18 out of 32 funds outperformed the NIFTY 100 – TRI (23.5%). If we had performed the same analysis on 22nd Dec 2017, only 10 out of 27 funds would have outperformed. Only 3 out of 28 funds in Dec 2018! This improved to 20 out of 28 in Dec 2019 but fell to 10 out of 29 in Dec 2020.

    So in the last five years, only twice (2019 and 2021) have more than 50% of the category beat the benchmark.

    In summary, it has been a reasonably good year for actively managed funds, with more than 50% of funds in a category beating the benchmark except for Value, Contra, Pharma and Mid cap funds. As pointed out earlier, these results should not be used to make any investment decisions.

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