Active vs Passive Investing: Mid Cap Equity Mutual Funds

Published: December 18, 2016 at 3:04 pm

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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

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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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3 Comments

  1. Next time you update this post, can you please compare returns of ICICI Prudential Midcap Select iWIN ETF with multicap funds? I am asking this because according to valueresearch’s classification this ETF’s large:mid cap stocks ratio is almost 1:1, and they also classify this under multicaps.

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