Big fund houses fail to impress

If you are a mutual fund investor, you may often decide to buy or sell units based on the returns of individual schemes. But have you thought about how individual fund houses have performed across market conditions?

An analysis of the top 15 AMCs, together accounting for 95 per cent of the equity schemes' assets under management (AUM), shows that only a few have recorded a consistently good show across the many schemes they manage.

For instance, only three AMCs actually beat indices such as the Sensex, Nifty and BSE-100 across their equity funds, over one-, three- and five-year time-frames.

As many as six mutual funds, however, drew a blank, lagging their benchmark indices in all three time-frames.

Fluctuations

Of the 212 equity schemes in the top 15 fund houses, 89 outperformed over a one-year period, a third of them over one and three years and only a little over a sixth of them beat their indices over all three time-frames.

Among the large AMCs, HDFC, Fidelity and DSP Blackrock have been consistently among top performers. Over the last couple of years, Reliance, Sundaram, and Franklin Templeton, among the large houses, slipped in average performance, while AMCs such as IDFC, UTI and ICICI registered improvements.

What is interesting is that the schemes of smaller fund houses such as Quantum, Benchmark and Mirae notched up average healthy returns. Of course, these AMCs have a limited track record with a small number of schemes in operation and, hence, need to be tracked more closely to check for consistency.

The last three years have been a tough period for active management of funds as markets crashed over 50 per cent in 2008-09, more than doubled in 2009-10 and remained in a largely flat to declining mode in the last six months.

Indeed, a fund or a fund house that stayed on top of such fluctuations may be more suitable for investors across board, and conservative ones in particular.

Consistently up there!

Among the 15 largest fund houses by assets, only in HDFC, DSP Blackrock and Fidelity did the average returns of their equity schemes beat the Nifty, Sensex and the BSE-100 consistently over the last five years. HDFC comes in as the top fund house as 11 of its funds have bettered benchmarks. This is especially so over the last three years.

Simply put, if you had purchased units in all of HDFC's equity funds, your ‘portfolio' would have outperformed by 3-7 percentage points across time periods.

It is worth mentioning that DSP Blackrock and Fidelity had only 10 and six funds respectively under operation.

Five of Fidelity's six funds outperformed over one- and three-year periods and again with an impressive 3-4 percentage points outperformance over indices.

At the other end of the spectrum, funds of HSBC, Kotak, Sundaram, Tata, SBI and Principal were underperformers.

Had you bought units of all their equity funds, you would be sitting on a value that is 5-6 percentage points lower than the standard indices, over all the three time-frames. Birla Sun Life, Tata, Sundaram and SBI, that have 13-21 equity schemes, saw only very few of them outperform.

Funds from AMCs such as Reliance, Birla and Franklin Templeton were, on an average, underperformers over the last year, but fared well over three- and five-year periods.

Infrastructure, power drag

Among the top fund-houses in terms of average returns — HDFC, DSP and Fidelity — it is the diversified schemes that have led outperformance.

So, a HDFC Top 200, HDFC Equity, DSP BR Top 100 Equity, Fidelity Equity have led the outperformance. Even the tax schemes and mid-cap focussed schemes of these houses performed well. The point to note is that since these houses had a limited number of schemes focussed on themes such as infrastructure, power or economic reforms — all of which have fallen heavily in the markets — the overall return did not suffer.

Fund-houses such as Sundaram, SBI, Kotak, ICICI and Reliance suffered as these AMCs had several funds focussed on power, capital goods, infrastructure and the like, and their diversified funds too underperformed, thus dragging overall returns.

So, Sundaram Select Focus, Reliance Vision, Reliance Growth, Kotak Opportunities or SBI Bluechip all underperformed, which added to the woes of a, say, Sundaram Capex Opportunities and Reliance Diversified Power, already reeling under market volatility. ICICI Pru Infrastructure is another example.

It is also worth mentioning that Sundaram and Reliance are known to go heavy on cash, to the tune of 20-30 per cent of some portfolios, in order to tide over volatility. Inability to time the redeployment erodes potential returns.

In the case of UTI, though its dividend yield, equity and opportunities have delivered consistent performance, its infrastructure, midcap, transportation and logistics and MNC funds dragged down the overall fund-house returns.

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