Most equity MFs in India underperform over 5 years: Report

MUMBAI: Majority of equity mutual funds in the country have underperformed against their respective benchmark indices over the last five years, according to a report by S&P Dow Jones Indices and Crisil released today.

"The underperformance of actively managed funds in comparison to the benchmarks over the latest five-year period demonstrates once again the difficulty for fund managers to consistently outperform the benchmark," S&P Indices Director Simon Karaban said.

A benchmark is a standard against which the performance of mutual fund scheme can be measured.

The agency used the S&P Indices Versus Active Funds (SPIVA) scorecard to come to the conclusion.

The scorecard reveals a majority of large cap equity funds failed to beat the S&P CNX Nifty, the benchmark for large caps, with 53.33 per cent underperforming their benchmark over the last five years, 57.14 per cent over the last three years and 52.63 per cent over the last year.

The per centage of actively managed equity funds underperforming the benchmark indices has seen a declining trend since December 2010. However, their number still exceeds those outperforming the indices, a Crisil statement said.

However, data from the diversified funds and equity linked saving schemes ( ELSS) suggests per centage of funds outperforming the benchmark in both one-year and three-year period is stable as compared to five-year period, the statement said.

Active managers of equity-oriented hybrid funds have also fallen behind benchmarks over both the one-year and five-year time frames, it said.

In contrast, the majority of active managers of debt oriented hybrid funds or Monthly Income Plans (MIPs) outperformed the benchmark CRISIL MIP Blended Fund Index over the three and five-year time frames, it added.

In the one-year period ended June 2012, the majority of gilt and balanced funds underperformed, while the majority of debt, ELSS and diversified funds beat their benchmarks.