Answering some Mint50 concerns3 min read . Updated: 22 Jul 2019, 03:31 PM IST
- Sometimes the difference between two schemes is very minor and one scheme makes the cut simply on a technical ground
- Do consult your financial adviser if you have one before taking a drastic portfolio churn decision
Many questions have been seen on Mint’s social media timelines and also through emails on some aspects of Mint50, a curated list of investment-worthy funds. This is an attempt to answer some of the concerns. One key issue concerns the category changes of some funds and what that has meant for the Mint50 list. Funds have changed categories, either to comply with the Securities and Exchange Board of India’s (Sebi) rules of category changes or to rejig their own suite of products using this opportunity.
There are two issues regarding this we notice on our timeline.
1. Why Sebi has done this and why it is wrong. While we will not be able to answer for the regulator, but would just like to say that the better definitions and categorizations have pushed the market towards being true to label. There is a short-term shock to the market, but it’s better to do this at the current level of mutual fund AUM (assets under management) than when it is much higher.
2. Why we have used past performance of funds that have jumped categories because that is unfair to the rest who were true to label. Let’s look at this in two parts.
2a. The final table that you see here is a distillate of the entire process and shows you a snapshot of the schemes chosen. Since most investors are looking at return metrics, we have kept the risk, portfolio hygiene and our qualitative research under the bonnet. The schemes have made it to the list not just because they show better returns, but also because their risk-adjusted return is higher, they have good portfolio hygiene factors and did well on qualitative factors.
2b. The specific funds mentioned were already drifting towards the new category. For example, Mirae Asset Large Cap Fund, despite having a multi-cap tag, has had a distinct large-cap focus in line with Sebi’s requirements. Principal Emerging Bluechip Fund and Mirae Asset Emerging Bluechip Fund, too, have had a large-, mid-, and small-cap allocation which has been more or less in line with Sebi’s requirement for the category. Principal Emerging Bluechip Fund has always had 35% large-cap exposure as required under the regulations and Mirae Asset Emerging Bluechip has been at 30-35% exposure to large-caps most of the time. ICICI Prudential Corporate Bond Fund’s portfolio has met Sebi’s requirement for a majority of the portfolio being in the highest-rated instruments in its portfolio in the past too. It has held a predominantly AAA portfolio. It may have taken higher government securities (G-secs) exposure but never gone below AA. Its modified duration too is being managed just as it was in the past and in line with peers.
On the question of why some funds we have chosen feature on other lists with lower ratings, for example, CRISIL Research’s own ratings, is that we have only used CRISIL Research as a data partner. The methodology and the direction is ours. Each rating will have its own logic and you can read Mint’s logic here.
Another concern is regarding the change in the list’s name from Mint30 to Mint50. What should you do if you were holding some of the Mint30 schemes that do not find their way into the new list? You do not have to immediately switch, sometimes the fund loses its place not because there is something wrong with it, but because there is a better scheme that makes the cut. Sometimes the difference between two schemes is very minor and one scheme makes the cut simply on a technical ground. Therefore, examine the scheme you have and see if it is still doing well, it may make sense to hold on to it rather than totally churn your portfolio. Remember that there are many costs associated with exit like taxes and exit loads, so do take those into account. Do consult your financial adviser if you have one before taking a drastic portfolio churn decision.
Please do continue mailing us at firstname.lastname@example.org and tagging our social media handles and we will keep answering the concerns and questions. After all, the list is about getting it right for our readers.