List of funds that have consistently beat benchmarks with good downside protection

Published: October 18, 2018 at 10:25 am

Last Updated on

Here is a list of funds (October 2018) that have consistently beat benchmarks with good downside protection (funds that fell less than the index. The results are derived from the freefincal monthly consistency screener (Oct will be published next week). I would like to publish this list along with the screener each month from now on.

There are two reasons for doing this. (1) People appreciate the importance of downside protection only after the market falls and (2) this gives a lot more mileage for my screener.

What is mutual fund downside protection consistency?

  1. Suppose you want to study a mutual fund for 3 years and make a list of monthly returns during that period.
  2. Then you find for which months the benchmark index gave a negative return.
  3. Then you take one fund and ask during those negative index months, did the fund fall more or less? That is if index monthly returns were -10%, was fund return -8% or -12%? Obviously -12% is bad.
  4. You take the average of those months when the fund fell less than the index and calculate if, over a 3Y period, the fund’s losses were, say -20% (on average), how much of those losses did the fund capture? This is known as downside capture.
  5. a downside capture of less than 100% is desirable as this means that the fund lost less than the index.
  6. Now you repeat this calculation over every available 3Y period and find out how consistently did the fund lose less than the index.  This is downside protection consistency.
  7. Higher the downside protection consistently, the better for the investor.

Over the long-term, it is downside protection that results in outperformance. Read more: What is mutual fund downside protection and why is it important?

What is return outperformance consistency?

  1. Suppose you study a mutual fund from 1st Jan 2013 to Oct 17th 2018. This will give about 1600 or so three-year periods.
    • 1st Jan 2013 to 1st Jan 2016 is one 3Y period
    • 2nd Jan 2013 to 2nd Jan 2016 is one 3Y period
    • and so on ….
    • This referred to as rolling returns.
  2. You compute returns for the fund and index for each of the available 3-Y periods. Then you ask:
  3. The no of available 3Y periods for the index = 500 (as an example). Out of these 500 periods, how many times did the fund beat the index?
  4. Say the fund beat the index 300 times. Then rolling return outperformance consistency is  300/500 = 60%.

List of funds that have consistently beat benchmarks with good downside protection

  1. We take all equity direct mutual funds that have not changed much due to the SEBI categorization
  2. We compute rolling returns and downside protection consistencies for all possible 3Y, 4Y and 5Y periods from Jan 1st 2013
  3. Then we filter funds with rolling return outperformance consistency > 70% and downside protection consistency > 70% for 3Y + 4Y + 5Y. This is our definition of a consistent performer

October 2018 List of funds that have consistently beat benchmarks with good downside protection

List of categories and benchmarks used

ELSSNifty 200 TRI
Large and midcapNifty 200 TRI
multi-capNifty 200 TRI
mid capNiftyMidcap150TRI
small capNiftyMidcap150TRI
large capNifty 100 TRI
valueNifty 100 TRI
aggressive hybridBSE Balanced Index
infrastructureNSE Infra TRI
bankingNSE Bank TRI

The benchmarks used here are a lot more representative of the actual fund benchmarks. In my monthly screeners, I use tougher benchmarks like Nifty Next 50 and Nifty 100 Equal Weight.

List of consistent ELSS funds

Quantum Tax Saving Fund
BOI AXA Tax Advantage
HDFC TaxSaver
Taurus Tax Shield
UTILong Term Equity Fund (Tax Saving)
Aditya Birla Sun Life Tax Relief ’96
Axis Long Term Equity Fund
BNP Paribas Long Term Equity Fund
DSP BlackRock Tax Saver Fund
IDFC Tax Advantage  (ELSS) FundGrowth
Invesco India Tax Plan
JM Tax Gain Fund (Direct)
L&T  Tax Advantage FundGrowth
Quant Tax Plan
LIC MF Tax PlanGrowth
Edelweiss Long Term Equity Fund (Tax Savings)
IDBI Equity Advantage FundDirect

List of consistent Large and Midcap funds

Aditya Birla Sun Life Equity Advantage Fund
Canara Robeco Emerging Equities
ICICI Prudential Large & Mid Cap Fund
IDFC Core Equity FundGrowth
Invesco India Opportunities Fund
Mirae Asset Emerging Bluechip Fund
Principal Emerging Bluechip Fund
Tata Large & MId Cap Fund

List of consistent multi-cap funds

Franklin India Focused Equity Fund
BNP Paribas MULTI CAP Fund
DSP BlackRock Focus Fund
IDFC Multi Cap Fund
JM Multicap Fund
L&T Equity FundGrowth
Mirae Asset India Equity Fund
Principal Multi-Cap Fund
Reliance Focused Equity Fund
Kotak Standard Multicap Fund
Tata Retirement Savings Progressive Plan
Quant Plan
Quant High Yield Equity Plan
Parag Parikh Long Term Equity Fund

List of consistent mid-cap funds

L&T Mid Cap FundGrowth
Kotak Emerging Equity Scheme

List of consistent small-cap funds

Franklin India Smaller Companies Fund
DSP BlackRock Small Cap Fund
Kotak Small Cap
Reliance Small Cap Fund Plan
Aditya Birla Sun Life Small Cap Fund

List of consistent large-cap funds

ICICI Prudential Bluechip Fund
Reliance Large Cap Fund Plan
Edelweiss Large Cap Fund

List of consistent Value-oriented funds

HDFC Capital Builder Value Fund
Templeton India Value Fund
Aditya Birla Sun Life Pure Value Fund
ICICI Prudential Value Discovery Fund
L&T India Value FundGrowth

List of consistent aggressive hybrid (balanced) funds

Canara Robeco Equity Debt Allocation Fund
DSP BlackRock Equity & Bond Fund
ICICI Prudential Equity & Debt Fund
Principal Hybrid Equity Fund
Reliance Equity Hybrid Fund  Plan
Tata Retirement Savings Fund Moderate
L&T Hybrid Equity FundGrowth

List of consistent infrastructure funds

Franklin Build India Fund
Taurus Infrastructure Fund
Invesco India Infrastructure Fund

List of consistent banking funds

ICICI Prudential Banking and Financial Services Fund
Invesco India Financial Services Fund
Reliance Banking Fund Plan

You can download this data along with monthly fund screener to be published next week.

Remember: Focus on protecting the downside, the upside will take care of automatically

My fund is not on this list, what should I do?

Don’t sweat. Use this or Equity Mutual Fund Rolling Upside/Downside Capture Calculator  or this Mutual Fund Downside Protection Consistency Analysis and find out how your fund has fared.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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