Active mutual funds fail to outperform benchmarks in 2020; large cap funds are the worst off

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Stock markets have soared during the period after plunging earlier in the year due to the coronavirus pandemic. (Image: REUTERS)

Active fund managers struggled to reflect the uptrend in indices in 2020, with 81% of large-cap equity indices not outperforming the S&P BSE 100, according to data provided by The S&P Dow Jones indices showed. The underperformance is not confined to large-cap funds alone, but a high percentage of ELSS funds, mid-cap, small-cap and even government bonds have lagged behind benchmarks on the one-year period ending in December 2020. after taking a nosedive earlier in the year due to the coronavirus pandemic.

“Over the one-year period ending in December 2020, the S&P BSE 100 Index was up 16.84%, with 80.65% of funds underperforming the benchmark. In the second half of 2020, 100% of funds underperformed the S&P BSE 100, ”S&P wrote in its latest SPIVA India Scorecard report. The benchmark of ELSS funds, the S&P BSE 200, rose 17.92% in 2020. It outperformed 65.12% of actively managed funds in the category. Similarly, the benchmark of mid-cap and small-cap funds, the S&P BSE 400 MidSmallCap index, rose 26.76% over the one-year period ending in December 2020. 67% of funds mid-cap and small-cap failed to reflect such a movement.

The story was similar in the fixed income category. Half of government bond funds underperformed the S&P BSE India Government Bond Index, while over 90% of composite bond funds lagged the performance of the S&P India Bond Index.

“In 2020, India has joined markets around the world facing extraordinary volatility from COVID-19,” said Akash Jain, associate director, Global Research and Design, S&P Dow Jones Indices. He added that the second half of 2020 has been a particularly difficult time for active Indian equity funds where 100% of large cap funds, 80% of ELSS funds and 53% of mid and small cap funds have underperformed. performed their benchmarks.

Data has shown that actively managed equity funds have underperformed their peers, even over longer periods of time. Over 87% of large-cap funds underperformed the BSE 100 over a 3-year and 5-year period, while 68% fell behind the index over the 10-year period. While most of the rest lagged behind, 35% of mid-cap and small-cap equity funds outperformed their benchmark over a 3- and 10-year period. However, 54% of these mid and small cap funds underperformed over the 5 year period.

The underperformance over several years has led to the closure of some actively managed funds. In the past year, almost 4% of large-cap, mid-cap and small-cap funds did not survive. Among ELSS funds, the number is up 5%.

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