Variation in mutual fund return numbers

by Manshu on October 29, 2012

in Mutual Funds

Austere posted a comment a few days ago which spoke about mutual fund returns being different for the same fund in different websites, and even within the same website.

Here is the comment:

austere October 15, 2012 at 6:10 pm [edit]

Hi,
I’m confused, can you help?
was reviewing mf’s, and noticed a perplexing thing–take a fund, in this instance Franklin India Smaller Companies Fund.
Going by the Moneycontrol portfolio returns for 5/3/2 yrs are 14%, 33%, -5%
But if you do a fund search on Moneycontrol, returns for 5/3/2 years are 2.7, 9.9,-2.5
Morningstar has a totally different set of numbers 20, 10 and 3%.
Wondering which set of numbers to go by. The fund factsheet on the FT site has only yearwise return!
Mira

Sorabh, who is probably one of the most polite commenters I’ve seen here has answered one part of this question in fairly good detail, and I must admit I’m going to repeat a lot of what he said, and then present one difference that I haven’t been able to reconcile.

Annualized versus Absolute Returns

First, let’s take a look at the seemingly different numbers from the same website on the same mutual fund because that’s easier to clarify.

The Moneycontrol page on Franklin India Smaller Companies fund has two sets of numbers, one for absolute returns and one for annualized returns. I would imagine that the portfolio contains the absolute number too since that’s the one you are interested in when reviewing your portfolio.

In this case the absolute return for the last 3 years has been 36.5% and the annualized return has been 10.9%, and this just shows that if you reinvest your money at 10.9% for 3 years, you will get an absolute return of 36.5%. So within a website, there shouldn’t be a difference on the return numbers and there isn’t.

Differences between two websites

But between two websites, there are differences, and we will take the example of the growth option of the same fund on Moneycontrol, Value Research and Morningstar to see if these sites come up with the same returns.

Here is a table that shows the comparison.

MF Returns Comparison

MF Returns Comparison

As you can see, the returns for Value Research and Morningstar are identical, but the Moneycontrol number varies. If I look at the Franklin India page itself which has the absolute numbers for calendar years, those numbers match the return from the Value Research and Morningstar number but not the Moneycontrol numbers.

I have been looking to see why this difference exists but I haven’t found a reason yet. The four or five funds I looked at all showed the same result, so this isn’t a quirk in this mutual fund, but rather a real difference in the way Moneycontrol calculates returns.

If anyone knows how to explain the difference please leave a comment. In the meantime, I looked up the NAV on the Franklin Templeton website for this fund for these dates, and saw that if you calculate the returns based on these NAVs then those would match the ones shown by Value Research and Morningstar so my inclination is to look at these websites for any NAV comparisons.

However, I do feel that this difference is not because Moneycontrol is calculating incorrect results, but because they are calculating it in a different manner, so if you are comparing two mutual fund returns, and using Moneycontrol for both the funds then you should be fine, just don’t use data from two different websites.

Thanks to Austere for asking this question because I never knew about this difference before today, and thanks to Invest Mutual who answered a lot of my questions on Twitter and helped develop this post.

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{ 7 comments… read them below or add one }

austere October 29, 2012 at 11:24 am

Thank you!

Reply

Manshu October 29, 2012 at 5:12 pm

Thanks again for bringing it up!

Reply

Invest Mutual October 29, 2012 at 3:50 pm

Manshu

This is specifically for one-yr returns; I have not looked into the 3 and 5 yr returns
Using the AMFI website facility mentioned in my tweets – http://www.amfiindia.com/NavHistoryReport_Frm.aspx , I checked. Base NAV for Money Control could be 13.0741 which was NAV on 28.10.11 – there was no NAV on 26.10.11 and 27.10.11

Base NAV for VR could be 12.8103 – the NAV as on 25.10.12
Current NAV for both is 15.6493
Maybe this is the reason for the difference in one-yr returns!

Reply

Manshu October 29, 2012 at 5:09 pm

Thanks, I think you’re right, I’ve looked at the 3 and 5 year numbers and by changing the date a little you can get the numbers to match with what MC reports, so I guess it is just the way they calculate a whole year. It is a bit odd because in 2009, 26th was a Monday and in 2007 it was a Friday so you would expect they use the same NAV dates, but they don’t. I’ll see if I can write a follow up to this post later on.

Reply

Invest Mutual October 29, 2012 at 5:26 pm

I guess the days in between without NAV were non-business days – could be due to Diwali last year. Besides the change in NAV over the 2 days is massive causing the difference

Reply

Invest Mutual October 29, 2012 at 4:09 pm

Furhter, if use the returns caclulator and change the dates as given earlier, the one year returns seem to tally – http://www.moneycontrol.com/mutual-funds/nav/franklin-india-smaller-companies-fund/returns-calculator-MTE090.html

Reply

carez November 4, 2012 at 8:48 am

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