Small, midcap funds top benchmarks

More small and mid-cap funds have managed to outperform their benchmarks than large-cap schemes in the last five years, according to S&P Indices Versus Active Funds ( SPIVA).

Over the five-year period ended June 2014, 54.36% of the actively managed large-cap equity funds underperformed the S&P BSE 100 index.

Over the three-year period, the situation worsens with as many as 60.36% funds having underperformed the index, though over one-year period the funds have fared better with only 34.18% underperforming the index. However, the mid and small-cap stock space offers scope to generate alpha- excess returns over market returns.

The same is visible in the relatively lower number of schemes from equity-linked saving schemes (also known as tax-saving funds) and mid & small-cap funds, underperforming the indices – the S&P BSE 200 and the S&P BSE Midcap, respectively.

This data shows investors would be better off sticking to funds with long-term track record.