October 2016: Mutual Fund Performance Consistency Screener Tool

A mutual fund screener based on how consistent a fund has performed with respect to a category benchmark over every possible 3-year, 5-year and 7-year investment duration since 3rd April 2006 is presented. All equity funds and equity-oriented balanced funds (excluding equity savings funds) have been considered*.

The method adopted is based on this report:  A simple way to measure mutual fund performance consistency. Screener data for September 2016 can be found here.

* Rolling returns for some funds could not be calculated. The list of all such funds can be found in the screener.

Mutual Fund Performance Consistency Score

Rolling returns are a simple way to estimate how consistency a fund has outperformed a benchmark. Three-year rolling returns have been considered. For example, suppose 1000 such 3Y returns are available for the fund and 800 such returns for the benchmark. Here is an example:

icici-focussed-blue-chip-rolling-retuns

We ask how many times has the fund got a better 3Y return than the benchmark. Suppose 500 such fund returns are higher, the performance consistency score is computed as

= 500/800 = 63%.

The minimum of (1000 and 800) = 800 is used in the denominator.

Higher the consistency  score, the better the fund has performed with respect to the benchmark.

The simplest way to understand the efficacy of this method is to consider the performance score of well-known poor performers – certain funds from JM Mutual or LIC Nomura  – and check their consistency score. It would be quite low.

I think any score about 60% is reasonable and above 70% quite good. Less than 50% for the 3Y rolling returns is probably a warning sign to monitor closely.

An excel sheet in which funds can be screened for consistency across categories or per category is attached below.  The same benchmarks as the September 2016: List of Equity Mutual Fund Returns and Up/Down Capture Ratios are used.

CategoryCategory CodeBenchmark
BankginEQ-BANKBSEBankex-TRI
FMCGEQ-CGBSEfmcg-TRI
InfrastructureEQ-INFRABSEInfra-TRI
InternationalEQ-INTLNifty-TRI
ITEQ-ITBSEIT-TRI
Large capEQ-LCBSELargeCap-TRI
Mid-capEQ-MCBSEmidcap-TRI
Multi-capEQ-MLCBSE200-TRI
OthersEQ-OTHNifty-TRI
PharmaEQ-PHBSEhealthcare-TRI
Small CapEQ-SCBSEsmallcap-TRI
ELSSEQ-TPBSE200-TRI
BalancedBalancedBalanced Index

Using the Mutual Fund Screener

The screener sheet in the file contains all entries. To display only one or two categories, the user can click on the grey square (red oval below), then uncheck “select all: and then select the categories required. The screener is easy to use with Excel’s data filters. I shall post a video shortly to illustrate its usage.

mutual-fund-screener

If the no of rolling return entries is less than 500 then the fund is quite young to be judged. Higher the entries, the better.

Select a cut off for the consistency score: Above 60% or above 70% as mentioned above and check the funds which have done well. You can use this in combination with the Sep 2016 returns listing.

Do let me know if you any feedback to make this better.

Download the Oct 2016 Mutual Fund Performance Consistency Screener file

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4 thoughts on “October 2016: Mutual Fund Performance Consistency Screener Tool

  1. Thank you. It definitely is useful. It feels better – when I see my choice of funds in the 5 Year and 7 Year period are all scoring 80+, most of them scoring 70+ in the 3 year period.

    But I found one fund – SBI Blue Chip that ranks pretty low in this. It’s just hovering above 50%. But if you look at its performance it looks very good… the Alpha of this fund is pretty good – VR gives it at 10.95% compared to the category at 3.43%…

    So a question that would be worth probing … consistency and alpha … How do you use these two together?

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