Active vs Passive Investing: Mid Cap Equity Mutual Funds

/ M. Pattabiraman / 3 Comments

Published: December 18, 2016 at 3:04 pm

Photo of M Pattabiraman, founder, editor and primary author of freefincal.com By M. Pattabiraman   

Last week I had posted a comparison of large cap funds with few relevant indices.  This time let us do the same with mid-cap funds – compare SIP and Lump Sum returns over the last 1,2,3,4,5,6,7,8,9 years.

As before, a passive mutual fund is just an index (either cap-based or strategic). The expenses associated with investing in such a passive fund are ignored so that it is that much harder for active funds to beat them. Therefore, no ETFs or index funds are included in this study.

Nifty Next 50 (price index) 

The top 51 to 100 in terms of market cap traded at the NSE. Not exactly a mid-cap index, but I was curious. See why: Evaluating the Nifty Next 50 as an Index Fund

mid-cap-nifty-next-50

 

Above 3Y a good 70% of  mid-cap funds have outperformed. Not bad. This excludes dividends though.

Nifty Free Float Mid Cap 100 (price index) 

This defines a mid-cap by calculating the number of actively traded shares, excluding those held by promoters, the govt. etc. Read more here. Stocks are among the bottom 25% in terms of free-float market cap (excluding the bottom 10%). Nifty 50 stocks are excluded. Principal Index Fund tracks this. This is a better representative of the mid-cap segment than other NSE mid-cap indices (50, 150)

mid-cap-nifty-free-float-mid-cap-100

Here too, similar story. But excluding dividends.

BSE Mid Cap (Total returns index) 

This represents the 71% to 85% of the average daily total market capitalization of the BSE.

mid-cap-bse-mid-cap-tri

hmm interesting!

BSE Select Mid Cap (Total returns index) 

Thiry largest and most liquid from the above index are part of this.

mid-cap-bse-mid-cap-select-tri

Now, what do we have here! Somebody should create an index mutual fund based on this index. That is impressive. A good ~ 50% of mid-cap funds could not beat this index.

Caveat: this was launched only in Jun 2015. Much of this data is back-calculated. Will this performance repeat in real-time? Watch this space 🙂

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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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