July 2018 Equity Mutual Fund Performance Screener

The freefincal Equity Mutual Fund Performance Screener is back after a five-month break. Use this screener file to hunt for equity funds that have consistently outperformed category benchmarks/indices with good downside protection (better performance when the index is down)  and/or upside performance (better performance when the index is up). This screener is meant for DIY investors to select a mutual fund (not review existing holdings).  The  PlumbLine” is a set of handpicked mutual funds meant for the new investor to quickly get started when they use the  Freefincal Robo Advisory Software Template.

The break was necessitated by the SEBI recategorization of mutual funds. The new screener has multiple changes.

  • (1) About 100 funds have been removed as they have changed nature. Only funds that Value Research current ranks (gives a star rating to) have been included.
  • (2) The fund categories have been updated to match Value Research
  • (3) there are changes in category benchmarks (see below)
  • (4) Only direct fund are not part of the screener
  • (5) 1,2,3,4 and 5-year durations are considered
  • (6) Macro buttons to help screening have been added.
  • (7) Trailing returns have also been included. This will gradually replace the Value Research based screener

What does this Equity Mutual Fund Performance Screener cover?

It gives you three outputs:

  • Rolling return outperformance consistency That is over every possible 1Y,2Y,3Y,4Y, 5Y periods, the fund returns are compared with category benchmark returns. 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 ~ 77%.
  • Upside performance consistency over 1Y,2Y,3Y,4Y, 5Y: Higher the better. A score of 70% means, 7 out of 10 times, the fund performed better than the category benchmark when the benchmark was moving upThis is a measure of reward.
  • Downside performance consistency over 1Y,2Y,3Y,4Y, 5Y: Higher the better. A score of 60% means, 6 out of 10 times, the fund performed better than the category benchmark when the benchmark was moving down. This is a measure of risk protection.

When to use this mutual fund screener

I recommend using this file only when you are on the lookout for a new fund after completing the following steps:

Define need and duration —-> Decide asset allocation (use this tool) —-> Decide product category (use this guideline for mutual funds) —-> Then use this screener for equity funds.

Since the debt mutual fund space is constantly shifting and a qualitative search is necessary, I believe it is dangerous to build a debt mutual fund screener and therefore will not.

If you open the screener file, you see column headings such as this.

You see the fund category; benchmark; Fund name; no of 1Y returns of the benchmark(index); no of 1Y returns of the fund; no of times the fund 1Y return is above index 1Y return; the 1Y rolling return consistency; upside performance consistency and downside protection consistency. These columns are repeated for 2Y,3Y,4Y and 5Y.

Now you can screen by filtering out funds that have return outpeformance consistency of >=70% a downside protection consistency >= 70% and so on. You can do this manually with the excel filter buttons on use the macro buttons as shown below.

Category Benchmarks Used

Category CodeBenchmark
BankingEQ-BANKBSEBankex-TRI
InfrastructureEQ-INFRA BSEInfra-TRI
LargecapEQ-LCNifty 100 Equal Weight
Value OrientedEQ-VALNifty 100 Equal Weight
Small CapEQ-SC Nifty Next 50 TRI
Mid-capEQ-MCNifty Next 50 TRI
Multi-capEQ-MLCNifty Next 50 TRI
Large and MidcapEQ-L&MCNifty Next 50 TRI
ELSSEQ-TPNifty Next 50 TRI
Hybrid Aggressive (balanced)HY-AHBSE Balanced Index

The categories are the same as that used by Value Research.

BSE Balanced index use to benchmark equity-oriented balanced fund is one of my own making: A new & accessible benchmark for balanced mutual funds

As for Nifty Next 50, the reason why it is used extensively is due to its fantastic track record in beating actively managed funds (in terms of returns, not risk management): Nifty Next 50: The Benchmark Index That No Mutual Fund Would Touch?!

Due to the new results presented in my talk on index investing: Can we get higher returns with lower risk?, the Nifty 100 EW index is a much better choice of largecap and value benchmark than the nifty 50 or nifty 100.

Reward measure: Rolling returns outperformance consistency

Rolling returns are a simple way to estimate how consistency a fund has outperformed a benchmark. Take the case of Quantum Long Term Equity (the fund in the graph below) and BSE Large Cap (index in the graph below). Bet 31st Aug 2008 and 9th Sep 2017, there are 991, 7-year duration. If the return for each of these durations is plotted for the fund and index together, we will get a graph like this.

Screener rolling return new - Jan 2018 Equity Mutual Fund Performance Screener

The corresponding entries in the screener sheet would be as below (this is an example):

Screener Quantum - Jan 2018 Equity Mutual Fund Performance Screener

Notice that out the 991 fund returns, all of them are higher than the chosen index.

Thus the rolling return outperformance consistency over 7 years =

(no of times the fund has outperformed the index)/(total no of returns)

= 991/991 = 100%.

Naturally, higher the rolling return outperformance consistency, the better.

Reward and Risk measure: Upside Performance & Downside Capture

If you wish to understand how these are calculated, please read this first:  An introduction to Downside and Upside Capture Ratios and then proceed to this one for an example.

For some funds, a high downside capture consistency will lead to better returns and for some funds, a high upside capture consistency will lead to better returns. The screener can help distinguish between the two types of performers.

Recommend read: What is mutual fund downside protection and why is it important?

How to use the Equity Mutual Fund Performance Screener

There are multiple ways to screen for mutual funds. I will discuss a couple of examples.  If you are investing with a clear strategy, you should be clear about what category fund to choose. So the first step is to choose the category. You can either use the macro buttons (top right)

Or you can do this manually:

Then, method A:  Set the 3Y and 5Y rolling return outperformance consistency to be above 70% or so. That should give you a nice short list to choose from. Then among these, you can visually look for funds with good downside protection consistency and choose one.

method B: Look for funds with above 70% downside protection consistency over 3Y and 5Y and choose one.

Remember, never set narrow filters and do not be too demanding.  Wanting to select the fund with the best past performance is plain immaturity. Your screening criteria should yield 5-6 funds at all times.

Why should I use this screener? Why can I look at trailing returns and screen?

Trailing returns are say, 3Y or 5Y returns calculated with the last business date (and 3Y and 5Y prior).  This is just one data point to consider. Here we consider a lot more to determine consistency.

User guide for the freefincal mutual fund outperformance screener

Download the July 2018 freefincal equity mutual fund outperformance screener (with macro buttons for easy screening)

Download the July 2018 freefincal equity mutual fund outperformance screener (only the data, you can filter it yourself)

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10 thoughts on “July 2018 Equity Mutual Fund Performance Screener

  1. It appears to be the screener is pulling only direct funds, which will not help us with correct results. The five year metrics will be zeros. Can you please take a look?

      1. You have said that direct funds are not part of screener right, but the screener only pulls direct funds, it doesn’t pull regular funds. Hope you understand what i am trying to say.

  2. Thanks Pattu as always for the Screener. Request to also include Expense Ratio in the screener going forward since as you know, it is critical to consider performance etc vis-a-vis what you pay to get that much performance. If I am getting good performance at lower cost then I will go with that.

  3. Sir, why upside performance consistency does not match to the best fund returns for 1,2,3,5 yrs. So how is it different from fund returns.

  4. Have you, over time, simplified the mutual fund screener? I had used the previous versions (2016 or so) and these had more parameters for comparisons. Since even direct funds have 5.5 year history now, we can calculate more of the ratios and possibly use them for comparison.

    1. I am calculating them all (eg upside) but I have decided to remove them to keep it simpler to use

  5. Can you mention, from which year, the data is being considered to calculate rolling returns…
    Also, 10 year rolling returns are not required to consider !?

  6. Beating the benchmark with how much percentage is also important say 8% is benchmark and two funds of 9 % and 10% have beaten it and so listed in the results but can’t find the best one ..plz explain..

  7. Thanks Pattu Sir for sharing the screener. I have one basic query regarding the classification of funds in value research online. some of the fund houses has more than one fund for the given category. This is conflicting with the SEBI’s recommendation. For example : Franklin India Equity and Franklin India Focused Equity – both are categorized to multicap. But fund house says Franklin India Equity as multicap and other one as focused fund. This makes SEBI regulation as void due to wrong categorization. Is it correct to go with this direction.

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