Why Flagship MF Plans Don’t Always Deliver

Still, most of the major schemes have been unable to consistently deliver better returns, as per Mint analysis. This is represented by the attached graphic which shows the performance of some of the flagship schemes after three years of achieving good inflows. For each calendar year, from 2014 to 2018, one or two schemes have been selected based on the highest growth in AUM (Assets Under Management) and popularity of the fund in that year.

The analysis highlights two trends. First, flagship schemes tend to revert, meaning they tend to outperform in subsequent years with lower margins or flat-out underperform. Second, the league table is frequently shuffled. For example, when growth stocks started outperforming value stocks after 2017, ICICI and HDFC AMC schemes, which follow the ‘value’ style, started underperforming. Also, Axis AMC schemes, which follow the ‘development’ style, started performing better. This was seen again in 2022, with value players making a comeback.

HDFC’s Flexi Cap and Mid-Cap Opportunities (Class of 2014)

HDFC Flexi Cap Fund was the top scheme with the highest incremental change in AUM in 2014. “At that time, the fund got everything right: age of the fund, size of AUM, pedigree of the company, good track record of performance and its fund manager,” said Santosh Joseph, founder and managing partner, Germinate Investor Services.

However later, market conditions did not favor the ‘price style’ approach. The fund experienced tough times for many years after getting good exposure.

Though the fund is bouncing back in the current market, experts feel that this fund has better options in the flexi-cap category. “While there are no issues with the fund, it tends to score relatively low in terms of risk-adjusted performance over the long term,” said Nirav Karkera, head of research at Fisdom.

On the other hand, HDFC Mid-Cap Opportunities Fund, which attracted decent inflows even in 2014, continued to perform well in the subsequent years, almost beating the benchmark and category average returns in the long run. Experts say that the current size of the fund is about Rs. 29,000 crores could impact the fund’s performance going forward.

Axis Long-Term Equity (Class of 2015)

This diversified Equity-Linked Savings Scheme (ELSS) gained relatively good traction in 2015. “This fund, launched in 2013, when the market was turbulent, proved its mettle in two to three years’ time,” Joseph said.

The fund follows the ‘growth’ style and has performed well in the past in both short and long term. “It is a good fund, but the current market conditions are not conducive to ‘growth’ style. I would ask investors to stop monitoring it for some time.”

ICICI Pru Value Discovery; ABSL Frontline Equity Fund (Class of 2016)

According to experts, ICICI’s Value Discovery Fund was one of the most preferred choice of advisors a few years back (approximately 2015-16). But in the case of HDFC’s Flexi-Cap Fund, this fund too followed a ‘value’ strategy, was mis-positioned in the post-2015 market cycle and witnessed underperformance in comparison to its peers over a long period of time.

“It is not an evergreen fund, but it is a very strong strategic bet when you know how the economic or market cycle is positioned. This is one of the very few funds that can play the ‘value’ style really well,” Karkera said.

In 2016, ABSL Frontline Equity Fund was another top fund in terms of increase in AUM size. After showing consistent performance for several years by sticking to its growth mandate of investing in large-cap stocks with a diversified portfolio till 2017, the scheme has been under tremendous pressure to meet benchmark returns as well as from class peers. is behind.

Kotak Flexi Cap; Axis Focused 25 Fund (Class of 2017 and 2018)

Kotak Flexi-Cap Fund with Blend (Growth Plus Value) investment strategy and Axis Focused 25 Fund with Growth Focus were the two schemes with meaningful growth in their AUM in 2017 and 2018 respectively.

Both the funds have performed well in the past. “Kotak’s fund has captured the upside well while handling market downturns tactfully; Axis Focused Fund effectively uses strategies rather than market cycles,” Karkera said.

That being said, the recent performance of both has been weak with the change in market cycles.

takeaway

From the above analysis, it is clear that not all the flagship schemes will continue to deliver attractive returns. Arun Kumar, Head of Research, FundsIndia said, “There is no fund in the world that can outperform in all the market cycles.

Thus, it is advisable to build a balanced mixed fund portfolio with a mix of funds following different styles, so that underperformance in one fund can be offset by outperformance in another fund, which can smooth out portfolio returns. . However, this will come at the cost of paying a complex portfolio and higher expense ratios to various fund houses. Another option is to go for index funds and ETFs that track a benchmark index like Nifty or Sensex instead of trying to outperform it.

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