Half of the actively managed large-cap mutual funds in India failed to beat the S&P BSE 100 index during the course of 2021, the latest S&P Indices Versus Active Funds (SPIVA) report showed. Largecap fund managers were joined by mid and small-cap active fund managers, of whom 50% did not manage to mirror the returns charted by the BSE 400 MidSmallCap index. The performance of the ELSS funds was better with only 26.83% underperforming the benchmark BSE 200. Meanwhile, in the fixed income space, government bond funds and composite bond funds fared even worse with 79% and 61% underperforming their respective benchmarks.
Performance analysed
- Indian Equity Large-Cap funds compared to the S&P BSE 100: 50% underperformed in one year
70% in 3-years; 82.26% in a 5-year period; and 67.61% in a 10-year period. - Indian ELSS fund compared to the S&P BSE 200 index: 26.83% underperformed in one year
63.41% in 3-years; 79.07% in a 5-year period; and 58.33% in a 10-year period. - Indian Equity Mid-/Small-Cap funds compared to the S&P BSE 400 MidSmallCap Index: 50% underperformed in one year
46.51% underperformed in 3-years; 58.14% in 5-year period; and 56.06% in a 10-year period. - Indian Government Bond funds compared to the S&P BSE India Government Bond Index: 79.17% underperformed in one year
53.85% underperformed in 3-year period; 76.19% in a 5-year period; and 88% in a 10-year period. - Indian Composite Bond funds compared to the S&P BSE India Bond Index: 61.74% underperformed in one year
90.91% underperformed in 3-year period; 88.32% in 5-year period; and 100% in 10-year period.
Half of the large-cap funds underperform
“Over the one-year period ending in December 2021, the S&P BSE 100 was up 26.53%, with 50% of the funds underperforming the benchmark,” the SPIVA report said. The performance of active large-cap fund managers has been much worse over the longer horizon. However, the performance has been decent when compared to 2020, when 81% underperformed the BSE 100 index.
ELSS funds fared better in 2021 when compared to the BSE 200’s performance, returning 29.11%, with only 26.83% of funds underperforming the benchmark.
On the other hand, looking at mid and small-cap active funds, SPIVA said that the category has fared the best over the longer horizon. “Among all the categories evaluated in the SPIVA India Scorecard, the Indian Equity Mid-/Small-Cap category fared the best for active funds, with 56.06% of the active funds underperforming the S&P BSE 400 MidSmallCap Index over the 10-year period ending in December 2021,” the report said.
Fixed income funds
In the fixed income space, heavy underperformance has been registered when compared to the benchmark S&P BSE India Government Bond Index. In the last 10 years, 88% of fund managers have failed to beat the benchmark. Meanwhile, looking at the Composite Bond funds, 100% of the funds lagged their benchmark in the 10-year period.
Fund survivorship low over longer horizon
Over a longer time period, the survivorship of various categories of funds has also been analysed by SPIVA. Data showed that 30.99% of the large-cap equity funds have closed in the 10 year period ending December 2021. Similarly, 13.89% of the ELSS funds shut shop in the same period and 24.24% of mid & small-cap failed to survive. The survivorship rate is worse for government bond funds over the 10-year period, with 60% failing to hold their ground.
