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When Equity Mutual Funds Lose Trail Of Benchmark Indices

Monday, September 24, 2012
By Anand Birai

When the direct equity investors swing in the action with the surging equity markets, mutual fund investors also contemplate to invest in equity-based mutual funds. Investors in MFs get tempted to test the returns from equity markets funds.

This simple theory might work for the equity players that better the markets, better the returns, but not necessarily for the mutual fund investors. Though, the fund managers are expected to make the funds perform better than the benchmarks, due to a variety of reasons they might not be able to do so.

The recent example is the latest S&P Indices Versus Active Funds report which states that the majority of equity funds under performed compared to the benchmarks. The latest data reveals that a majority of large cap equity funds could not perform even better than the S&P CNX Nifty.  The leading benchmark index for large-cap companies listed on the National Stock Exchange of India (NSE). 53.33% funds underperformed their benchmark over the last five years, 57.14% over the last three years and 52.63% over the last year.

The volatile equity markets leave the fund managers with fewer options also due to the redemption pressures. Moreover, there are regulations and caps on the volumes of investments and exposures. The fund structures also prevent them from investing in short term opportunities which otherwise could have been exploited by equity investors or dealers.

The report by S&P also mentions the cases in which the funds outperformed the benchmarks. Amongst such funds include, diversified funds and Equity Linked Savings Scheme (ELSS). Over 53.10 per cent of diversified funds outperformed the benchmark S&P CNX 500 in the 1 year period ending June 2012. While comparing the data for a period of 3 years, this number increased to 61.6 per cent but dropped to 49.5 per cent in the 5 year period. About 70 per cent ELSS outperformed in both the 1 year and 3 year period but dropped significantly to 44.83 per cent in the 5 year period.

Principal revises fundamental attributes under its Debt Savings Fund  
Principal MF has announced the revision of fundamental attributes for Principal Debt Savings Fund - Retail Plan, with effect from 12th October 2012. Accordingly, AMC has revised allocation pattern of the scheme. The scheme would invest upto 100% in debt securities (including securitized debt upto 50%) and upto 100% in money market instruments (including cash and cash equivalent, CBLO & reverse repo). Investment in derivatives shall be upto 50% of the net assets of the scheme. The benchmark index has revised from CRISIL MIP Blended Index to CRISIL Composite Bond Fund Index. Also, AMC has announced changes in the investment objective and investment strategy of Principal Debt Savings Fund. Investors will have an option to exit without payment of any exit load from 13th September 2012 till 12th October 2012.

Taurus Dynamic Income Fund  declares dividend under
Taurus MF has announced dividend under Taurus Dynamic Income Fund, on the face value of Rs. 10 per unit. The quantum of dividend for distribution will be 100% of distributable surplus as on the record date. The record date for dividend distribution is 21st September 2012.

Birla Sun Life announces dividend under its Buy India Fund  
Birla Sun Life MF has announced dividend under dividend option of Birla Sun Life Buy India Fund, on the face value of Rs. 10 per unit. Accordingly, the quantum of dividend for distribution will be Rs. 1 per unit. The record date for dividend distribution has been fixed as 21st September 2012.

Canara Robeco announces changes in fund management responsibilities  
Canara Robeco MF has announced the appointment of Ravi Gopalakrishnan as Head of Equities and Krishna Sanghavi as Senior Fund Manager-Equities. Accordingly,  Ravi Gopalakrishnan will manage Canara Robeco Equity Diversified, Canara Robeco Large Cap+ Fund & Canara Robeco Capital Protection Oriented Fund-Series 1-36 Months (Plan A), Canara Robeco Monthly Income Plan will be jointly managed by  Ravi Gopalkrishnan &  Akhil Mittal, Canara Robeco Infrastructure will be managed by  Ravi Gopalkrishnan &  Yogesh Patil, Canara Robeco Yield Advantage Fund will be managed by  Ravi Gopalkrishnan &  Suman Prasad, Canara Robeco Emerging Equities will be managed by  Ravi Gopalkrishnan &  Krishna Sanghavi. Moreover, Krishna Sanghavi will manage Canara Robeco Equity Tax Saver, Canara Robeco Nifty Index & Canara Robeco F.O.R.C.E Fund, Canara Robeco Balance will be jointly managed by Krishna Sanghavi and Suman Prasad. The above changes became effective from 15th September 2012. 

JM Financial announces dividend under its Arbitrage Advantage Fund  
JM Financial MF has announced a dividend under dividend option of JM Arbitrage Advantage Fund, on the face value of Rs.10 per unit. Accordingly, the quantum of dividend for distribution will be Rs. 0.225 per unit. The record date for dividend distribution has been fixed as 24th September 2012.


Scheme Name Nature    1M% 6M% 1Y% 3Y%   
ICICI Prudential Top 100 Equity 3.29    5.77    17.1    9.67
Kotak Bond Deposit - Gro     Debt   0.92    6.11    12.7    8
Reliance RSF - Balanced     Balanced    2.97    9.81   13.9    9.78
DSP BlackRock MIP Fund -     MIP    0.85    4.2    11.8    7.56
Escorts Liquid Plan - Gr     Liquid    0.78    5.16    10.5   8.47
Reliance Equity Linked S     ELSS    3.13    12.9    18.9    11.7
MOSt Shares NASDAQ 100    ETF    -0.37    12.5    39.6   -
Baroda Pioneer Gilt Fund     Gilt   0.99   5.71    14.5    12.8


Opens on    Closes on
SBI DFS 366 Days (15) (G)    18-09-2012    21-09-2012
DWS HFTF-Sr 9 (3 Years) (G)    10/9/2012   24-09-2012
SBI DFS 90 Days (71) (G)   21-09-2012    24-09-2012
DWS HFTF-Sr 10 (5 Years) (G)    14-09-2012    25-09-2012
HDFC FMP 373D Sep-12 Sr-22 (1) (G)    20-09-2012    25-09-2012
Principal FMP 1098D Sr-B2 (G)    17-09-2012    25-09-2012


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