Mutual Funds that have performed well over the last 10 years

by Manshu on February 12, 2013

in Mutual Funds

FundsIndia has come up with an interesting research report titled: The FundsIndia 5 Best Schemes in the History of Indian Mutual Funds.

In this report they have listed down 5 equity funds that have done well over very long periods of time, and have given a little history about them, how they made their money, and fund managing style.

The first question I had upon reading this title was how do you select the paramaters for such a report? Do you stop at returns or do you go deeper and look at other things as well?

Here are the five things that they chose to see:

1. Longevity: Funds that are at least 10 years old
2. Performance: Ability to deliver higher than benchmark returns consistently
3. Resilience: Ability to withstand market downturns better than its benchmarks
4. Stability: Consistency of fund management principles and personnel
5. Investment-worthy: Their recent performances have not caused any concern keeping them investment worthy even today.

I think these are all good parameters but in my opinion if you are evaluating hundreds of mutual funds you should describe these mathematically and then evaluate funds on them. For example, stability can be shown by the number of fund managers that a particular fund had since its inception. I don’t think they went to that level of detail although they have used numbers to evaluate the funds.

The next question I had was if you select 10 years as the cut off point – how many funds do you really have left, and in then within that how many would have a performance worthy of  a second look?

To answer this I went to the following categories on Value Research and arranged the funds in descending order of their 10 year returns.

There were two things that struck me from looking at these funds in this manner:

Sheer number and range: I was amazed to see the sheer number  and range of equity funds that have done quite well over a 10 year period. The five funds that FundsIndia selected belong to 4 different categories according to Value Research and they are usually not the highest performing funds in that category for the 10 year period.

Difference between the 5 year and 10 year return number: The large number of funds that have returned over 20% returns for 10 years is simply mind boggling, but the same funds have pitiful returns over the last 5 years. This reinforces what most readers already know – the last five years have been bad for equity investors and no matter how good your mutual fund is – if the market doesn’t do well, how can the fund do well?

Given this background, while I think the report is useful and everyone should invest the ten minutes it will take to read the report, look at the fund names, and their story – I’m not convinced that you can call these five funds the best without a shadow of doubt, and indeed can you ever select five funds that you could call that?

Read the report here: The FundsIndia 5 Best Schemes in the History of Indian Mutual Funds.

Disclaimer: FundsIndia is an advertiser on OneMint.

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{ 41 comments… read them below or add one }

austere February 12, 2013 at 12:57 pm

Manshu
As I read this, I cant help thinking how fund returns are all over the place– remember my question with differing returns that you’d replied to a few months back?

I tend to think of my MF basket as my safety net, hence return plus worst case situation trends are important to me.

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Manshu February 12, 2013 at 5:57 pm

I’m not sure I understand the last line….could you please explain that?

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austere February 12, 2013 at 8:14 pm

How a fund did in 2008 is important to me.

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Manshu February 12, 2013 at 11:39 pm

Hmmm, I think a repeat of 2008 is possible and if it happens then all equity MFs will be affected. I think it is possible due to the fact that a lot of economic indicators are still doing very badly including the CPI number that’s been declared today.

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pattu February 12, 2013 at 3:26 pm

The report says:

“we chose these five funds as emblematic of the success of the Indian mutual fund industry”

So it deserves only that much importance. Obviously there are many “good fund” contenders in each category considered as the report concedes.

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Manshu February 12, 2013 at 5:59 pm

I’m curious as to what you think of mutual funds versus stock picking in general – thoughts?

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pattu February 12, 2013 at 9:14 pm

Terrified of stock picking! Just can’t bring myself to do it. I invest in equity MFs only because I am inflation-risk averse.

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Manshu February 12, 2013 at 11:35 pm

Thanks for the response.

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Ramamurthy February 13, 2013 at 8:29 am

Stock picking need not be too terrifying,as long as you keep it simple .Hope your investments in Mutual Funds do good and gradually you also venture into stock picking.

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Vidya Bala March 1, 2013 at 2:56 pm

Hello,
This is Vidya Bala, author of the discussed report. Thanks to Manshu for reviewing it. Pattu is right in that there are many good contenders. But as we stated, they are funds with a less than 10-year record. And since we used that as a criteria, we could not bring the ‘new heroes’ in to the list.
Do look back to see how many funds with that record continue to perform well. We all know there were funds from the Birla, Reliance or even UTI stable with a long track record. But they all fell back a while ago. Hence, while there can be any number of good contenders, we do not know if they will survive a decade. Hence, it is more reason why these funds gain importance. They simply stood the test of time. They have seen more downfalls and more rallies and we tested them in each of these to arrive at the list.

And to answer Manshu’s question that the five funds chosen were the the highest performers over the 10-year period – true, because the highest performers often times fell out mid-way…say in a 3-yr or 5-yr back. That is the reason why we used the criteria of not just 10 year point-to point but more recent performance and more importantly, rolling performance over long time frames.

Tks and hope to participate in more just interesting discussions. Vidya

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Vidya Bala March 1, 2013 at 3:09 pm

In the last para to answer Manshu’s question – I meant the five funds chosen were NOT the highest performers in the 10-yr period…sorry for the typo. tks

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Manshu March 2, 2013 at 12:34 am

Thank you very much for your comments. It is rare to see anyone but a blogger engage in discussion of the comments section of a blog and I really appreciate you doing that here.

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Ramamurthy February 12, 2013 at 3:35 pm

Manshu
As you rightly said the last 5 years data is not at all so bright.
I give below the data for the same 5 funds which were outstanding during last 10 years according to Funds India, and their corresponding last 5 year performance.

Last 5 Years Last 10 Years
1.FranklinIndia Blue Chip 5% 26.2%
2.DSP Black Rock Equity 4.4% 29.8%
3.HDFC Prudence 8.8% 26.00%
4.HDFC Top 7.2% 29.59%
5.ICICI Dynamic 5.6% 26.2%

These 5 year data has been picked up from the same article.
I wish Funds of India had pointed out the facts which you have raised so that the euphoria is not justified.This also proves the fact that no one should blindly accept the opinions of these experts.I think they have their own axes to grind.Read them and try to do your own assesment by going a bit deeper is the moral.

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Manshu February 12, 2013 at 6:03 pm

Sir,

As you’ve posted in your comments elsewhere, your own gains from the past 5 years have been much better than these numbers and although I haven’t compared them to other funds I think these numbers must be better than other funds.

So, what have you done differently that people can learn from?

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Paresh February 12, 2013 at 8:15 pm

Lets try:
 

Sr.No
Item1
Last 5 yrs
Last 10 Yrs

1.
Franklin Blue chip
5%
26.2%

2.
DSP Blackrock equity
4.4%
29.8%

3.
HDFC Prudence
8.8%
26%

4.
HDFC Top200
7.2%
29.59%

5.
ICICI Pru Dynamic
5.6
26.2

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Ramamurthy February 12, 2013 at 10:30 pm

Manshu
I think my comments elsewhere was about direct investments in equity market which I made and not in mutual funds.Frankly I dont recollect the details and cannot recall the exact comments.Did my comments appear under “SUGGEST a TOPIC”.In fact I have compared the returns from my equity investments with the returns I would have got had I invested the same amount in HDFC equity fund growth option.My returns from direct investments in equity are clear winners.If I remember right this was my earlier comment.

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Manshu February 12, 2013 at 11:36 pm

okay, yeah they were equity not MF. Thanks.

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Ramamurthy February 12, 2013 at 3:40 pm

Manshu
Can you please let me know how to make a Table of our comments.The comments which finaly appear in the comments are just a straight line though I have entered the figures with pauses between the figures to make them more readable.

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Manshu February 12, 2013 at 6:04 pm

I’m sorry I don’t think there is a way to do that. Not sure if HTML tags for table work on comments. Let me test here.

Test Test 2

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Manshu February 12, 2013 at 6:05 pm

No, they don’t. Sorry sir I don’t know of a way. Does anyone else know how to do this on WordPress? Is there a plugin perhaps?

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Paresh February 12, 2013 at 8:17 pm

Table not working here.
I first tried on my blog…there it was ok.

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Paresh February 12, 2013 at 8:24 pm
Ramamurthy February 12, 2013 at 10:44 pm

Thank you sir.Incidentally I saw your blog also in the link provided bu you and liked the post.I will be in touch with your blogs also in future.Thanks again.

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Manshu February 12, 2013 at 11:36 pm

Is there a plugin you use Paresh? I’m not sure why this is different here than in your site.

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Paresh February 13, 2013 at 8:02 am

No plugin infact..I used same html at both places.

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Paresh February 13, 2013 at 8:07 am

Thank you Mr.Ramamurthi.Good to know that.
By the way, you may aware that you can subscribe for multiple blogs at google reader

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Manshu February 13, 2013 at 9:29 pm

okay so a table does in fact work if you have correct HTML code which I didn’t write in the first instance.

But it is rather cumbersome to write HTML code for tables so you can use the following tip:

1. Make a table in Excel
2. Go to this website and paste your Excel table to generate HTML code. http://tableizer.journalistopia.com/tableizer.php
3. Use the code and paste it here.

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Paresh February 14, 2013 at 8:17 am

Yes.Good idea.

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harineem February 12, 2013 at 3:47 pm

I actually have 2 of these and one of them for 10 years. The one I have for 10 years I picked when I had no clue on MFs and the agent was pushing me for something else(Flexicap which was a star then). But I was lucky that my random pick worked very well but recent years its not been as good and new entrants like Reliance Growth seem to be doing better.
MF picks should also be like equity not completely driven by experts. For example sector-based MFs are a no-no by experts but pharma has been a star performer last 2-3 years. Returns are higher than diverse funds.

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Ramamurthy February 12, 2013 at 4:41 pm

No Harineem.Reliance Growth is a very old Fund(more than 15Years)It,s performance during last 4 to 5 years is not at all attractive.Better do a more careful dig if you want to invest in that fund.There are better choices in the same fund category.

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harineem February 12, 2013 at 5:23 pm

Stand corrected! Thanks I am not invested in Reliance Growth anymore.

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Manshu February 12, 2013 at 6:09 pm

You have owned the same fund for over 10 years Harinee? Did you ever think of selling it when the markets tumbled?

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harineem February 12, 2013 at 7:57 pm

No I just sold 50% just to take gains out in Jan during the rally :)

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Manshu February 12, 2013 at 11:36 pm

Excellent, thanks for the response!

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Ashok February 14, 2013 at 8:01 pm

Same with me. I have had FT Bluechip for 10 years now. DSPBR Equity for 5+ years.

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Paresh February 12, 2013 at 4:11 pm

I wouldalways like to add some one from specialized mid cap category like HDFC mid cap opportunities or Sundaram Select midcap.

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Manshu February 12, 2013 at 6:10 pm

What’s their performance been like in the last 10 and 5 years Paresh?

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Paresh February 12, 2013 at 9:04 pm

Hi Manshu,
In fact thought is to add mid cap fund for more aggression & diversification.

I was invested in NFO of HDFC mid cap opportunities in 2007 & till it has provided impressive gains of CAGR 11% in 6 years.

Sundaram select mid cap is little bit aggressive but good alternative to think for in mid cap space.

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Manshu February 12, 2013 at 11:37 pm

That is an interesting idea, I think it can be useful in a portfolio. Thanks for sharing.

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moronbuffett February 13, 2013 at 7:30 am

As long as 2008-2009 years fall under the past 5 yr performance data, the return numbers are going to be skewed to the higher side.

The fund managers are kidding themselves (and hence the public) that they are doing something great to get these returns. It will be interesting to see these fund managers’ performance during a flatline market.

“..get me a monkey, ask it to throw some darts to pick a a list of stocks in the index, you have a fund manager”

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harineem February 13, 2013 at 3:15 pm

For some of us even that monkey seems to pick better stocks :)

Reply

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