63% of equity mutual funds underperform their benchmarks in 3 years.

Abstract: Approximately 63% of equity mutual funds have failed to outperform their benchmarks in the last three years, with mid-cap funds performing the worst. Only 78 of 213 funds outperformed. Small- and flexi-cap funds also underperformed, with considerable underperformance observed across a variety of categories. Investors should think about this thoroughly before making a decision.

Approximately 63% of equities mutual funds have failed to outperform their respective benchmarks over the last three years. There were approximately 213 equity mutual funds, of which 135 did not surpass the performance of their respective benchmarks. In other words, just 78 equity mutual funds surpassed their respective benchmarks throughout the specified time period.

Equity Mutual Funds: Underperformance Over the Last 3 Years

Table: ET online | Source: ACE MF

In the previous three years, the mid-cap group has suffered the most. Over the last three years, over 80% of mid-cap funds underperformed their respective benchmarks. There were around 25 mid-cap funds throughout this time period, and 20 of them failed to outperform their respective benchmarks.

Equity Mutual Funds: Performance Review Over 3 Years

Chart: ET online | Source: ACE MF

The small-cap funds were next on the list. Over the last three years, over 74% of small-cap funds have failed to outperform their particular benchmark. Out of 23 small-cap funds, 17 failed to outperform their benchmarks. Flexi cap funds and large and mid cap funds both underperformed their respective benchmarks by approximately 69%. Both categories had 26 funds apiece over the period, with around 18 funds underperforming in their respective categories.

Around 16 targeted funds have failed to outperform their particular benchmark. Around 64% of large-cap funds underperformed their respective benchmarks. In the last three years, two categories, ELSS and multicap funds, underperformed by 56% apiece. The value funds received the lowest underperformance score of 19% during the last three years. Out of 16 value funds, three underperformed their respective benchmarks. We omitted counter funds from the analysis because the category only contains three schemes, and all three have exceeded their benchmarks during the last three years.

Underperformers in 3 years.

Axis ELSS Tax Saver Fund, the largest ELSS fund by assets managed, has failed to meet its benchmark in the last three years. Mirae Asset ELSS Tax Saver Fund has similarly failed to outperform the benchmark. The plan returned 18.20% over the last three years, compared to 20% for its benchmark (NIFTY 500 - TRI).

The Parag Parikh Flexi Cap Fund, the largest flexi cap fund by assets managed, failed to outperform its benchmark. The plan returned 19.80% over the last three years, compared to 20% for its benchmark (NIFTY 500 - TRI).

Both Kotak Flexicap Fund and Motilal Oswal Flexi Cap Fund underperformed their benchmarks. SBI Focused Equity Fund returned 14.61% in the previous three years, compared to 19.99% for its benchmark (BSE 500 - TRI).

The SBI Large & Midcap Fund returned 21.63% over the last three years, while the benchmark (NIFTY LargeMidcap 250 - TRI) returned 23.11%.

SBI BlueChip Fund, a well-known large-cap fund, returned 16.63% throughout the time, compared to 17.94% for its benchmark (BSE 100 - TRI).

Kotak Emerging Equity Fund, the second largest mid-cap fund by assets managed, returned 25.59% versus 29.14% for its benchmark (Nifty Midcap 150 - TRI).

In the same time period, SBI Small Cap Fund and HDFC Small Cap Fund returned 25.29% and 27.70%, respectively, compared to a benchmark return of 28.71% (BSE 250 Small Cap - TRI).

DSP Value Fund and Groww Value Fund returned 17.17% and 17.95%, respectively, compared to the NIFTY 500 - TRI, which returned 20%. Quantum Long Term Equity Value Fund returned 19.23% over the previous three years, compared to 19.99% for its benchmark (BSE 500 - TRI).

We analyzed all equity mutual fund categories, excluding contra funds. We evaluated both regular and growth alternatives. We calculated performance over the past three years. It should be noted that the above exercise is not a recommendation.

The exercise was conducted to determine which equities mutual funds had underperformed their respective benchmarks over the last three years. Investment or redemption decisions should not be based on the aforementioned exercise. Before making an investing decision, one should always examine their risk tolerance, investment horizon, and goals.

(Disclaimer: The recommendations, advice, thoughts, and opinions shared by experts are their own and do not reflect the views of Alphabots.)

Bibliography: https://economictimes.indiatimes.com/mf/analysis/63-equity-mutual-funds-fail-to-beat-benchmarks-in-3-years/articleshow/112729472.cms?from=mdr