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?
- Suppose you want to study a mutual fund for 3 years and make a list of monthly returns during that period.
- Then you find for which months the benchmark index gave a negative return.
- 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.
- 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.
- a downside capture of less than 100% is desirable as this means that the fund lost less than the index.
- 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.
- 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?
- 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.
- You compute returns for the fund and index for each of the available 3-Y periods. Then you ask:
- 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?
- 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
- We take all equity direct mutual funds that have not changed much due to the SEBI categorization
- We compute rolling returns and downside protection consistencies for all possible 3Y, 4Y and 5Y periods from Jan 1st 2013
- 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
List of categories and benchmarks used
|ELSS||Nifty 200 TRI|
|Large and midcap||Nifty 200 TRI|
|multi-cap||Nifty 200 TRI|
|large cap||Nifty 100 TRI|
|value||Nifty 100 TRI|
|aggressive hybrid||BSE Balanced Index|
|infrastructure||NSE Infra TRI|
|banking||NSE 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|
|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|
|SBI FOCUSED EQUITY FUND|
|Kotak Standard Multicap Fund|
|Tata Retirement Savings Progressive 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|
|SBI BLUE CHIP FUND|
|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|
|SBI EQUITY HYBRID FUND|
|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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