1 min read.Updated: 22 Oct 2020, 03:33 PM ISTNeil Borate
The S&P BSE 100, the benchmark used by SPIVA, beat just 48% of large cap mutual funds in the first half of 2020 compared to 77% in the first half of 2019.
The S&P Indices versus Active Funds (SPIVA) report for January to June shows a rebound in the performance of actively-managed large cap mutual funds compared to indices. The report is released every six months by S&P Dow Jones.
The S&P BSE 100, the benchmark used by SPIVA, beat just 48% of large cap mutual funds in the first half of 2020 compared to 77% in the first half of 2019. The situation reversed in the mid and small cap space. The S&P BSE 400 Mid Small Cap Index beat 40% of mid and small cap funds compared to 19% in mid year 2019. The average return of large cap funds over the past year (ended June 2020) was -11.21%, close to the S&P BSE 100 return of -11.54%, both driven lower by the covid-19 pandemic.
"There has been a slight shift from growth to value stocks post covid and this is better captured by active fund managers rather than indices which are heavily concentrated in growth stocks," said Amol Joshi, founder Plan Rupee Investment Services, a mutual fund distribution firm. Over the longer term, indices have outperformed large cap funds in a significant way. The S&P BSE 100 beat 80% of all actively managed large cap funds over the past five years and 68% of such funds over the past 10 years. On the other hand, the S&P BSE Mid Small Cap 400 beat a much lower 53% and 44% of mid and small cap funds over the past five and 10 years, respectively. ELSS Funds stood midway between the two. Indices beat 77% and 53% of such funds over the past five and 10 years.
Institutional interest in passive (index) investing has grown in the recent past. The assets in passive exchange traded funds (ETFs) have swollen over the past five years, on the back of flows from institutions like the Employees Provident Fund Organisation (EPFO). Assets tracking Nifty Indices alone have risen to ₹1.6 trillion compared to just ₹7,000 crore in all types of ETFs tracking equity as well as debt, five years ago.