1 min read.Updated: 08 Apr 2021, 12:21 PM ISTNeil Borate
Government bond funds fared slightly better with only 50% being beaten in the past one year and 77% in the past five years. However, costs are likely to play a larger role in debt underperformance than equity underperformance
MUMBAI: A report by S&P Dow Jones Indices for India showed that 81% of large cap funds underperformed their benchmarks over the past one year ended December. The report compiled every six months by the index provider is called the SPIVA Report.
It also revealed that 67% of mid and small caps and 65% of ELSS (taxsaver funds) were beaten by their benchmarks.
Akash Jain, associate director, Global Research & Design, S&P Dow Jones Indices said, "In 2020 India joined markets across the world facing extraordinary volatility due to COVID-19. We saw a strong rebound that began at the start of the second quarter of 2020 continued into the second half 2020, with the S&P BSE 100 finishing the six-month period up 36.48%. During this recovery period we saw that the second half of 2020 has been a particularly challenging period for Indian equity active funds where 100% of the Large Cap funds, 80% of the ELSS funds and 53% of the Mid-/Small-cap funds underperformed their respective benchmarks."
The underperformance of large cap funds extends over longer time horizons also, the report shows. About 88% of such funds underperformed their benchmarks over the past three- and five-year period, and 68% over the past 10 years.
In the mid- and small-cap space, however, the picture is different. About 35% of such funds were beaten in the past three years, 54% in the past five years and just 36% in the past 10 years. On the debt side, composite bond funds fared badly, with more than 90% of such funds being beaten by indices over all time periods.
Government bond funds fared slightly better with only 50% being beaten in the past one year and 77% in the past five years. However, costs are likely to play a larger role in debt underperformance than equity underperformance. The cost factor has spawned a large number of debt exchange traded funds (ETFs) which passively follow indices.