Your fund manager fails, as bulls drive Sensex to new peak
Nov 01 2013 , New Delhi
Of 135 schemes with negative returns, NAV fell 50% in 8
A study of 203 open-ended diversified growth schemes showed that two every three schemes have given negative returns since November 5, 2010, the day Sensex hit its previous peak of 21,004.97.
Only 68 of the 203 schemes gave positive returns. Of 135 schemes that returned negative, eight saw their NAV falling by between 40 and 50 per cent.
NAV of 32 schemes was eroded by more than 25 per cent. In 76 other schemes NAV has been at least 10 per cent below their November 2010 levels. Though schemes have different benchmarks, there is no denying that most schemes have let down investors. Even a fixed deposit would have fetched around 8-9 per cent interest annually.
“The domestic equities market has historically offered double-digit annual growth in every 10 years. But we have not seen any return over the past six years. Sensex and Nifty have been able to regain previous peaks on the back of just a few stocks. We believe it would be wise to hold on to the schemes for another three years. They may compensate well,” said Kaushik Dani, a fund manager with Peerless Mutual Fund.
JM Equity Growth saw its NAV fall by 13.58 per cent to 36.22 on Wednesday from 41.91 on November 5, 2010. The objective of the fund is to provide optimum capital growth and appreciation and outperform Sensex, according to Bloomberg. Clearly, it has not served its objective well. NAV of Escorts Growth Plan, whose objective is to outperform CNX Nifty, has shed 22.69 per cent during the three-year period.
Reliance Vision, which had over 32 per cent allocation to banks, oil & gas and IT sectors as of September 30, saw its NAV fall to 249.04 from 309 three years ago, a decline of 19.40 per cent. Reliance Growth Fund saw a 16.18 per cent fall in NAV to 458.09 from 546.51.
HDFC Premier Multi-cap Fund, which invests in large cap and mid-cap stocks, saw its NAV tumble 19.52 per cent. Sundaram Select Focus Fund, which invests just 10 to 20 stocks, saw its NAV drop by 10.62 per cent to 91.43 from 102.29.
The NAVs of DSP BR Equity Fund (down 8.69 per cent), Birla Sun Life Equity Fund (down 8.68 per cent), SBI Magnum Multi-cap Fund (down 8.47 per cent), Franklin India Opportunities Fund (down 8.17 per cent) and HDFC Growth Fund (down 7.91 per cent) show their managers have not really been managing well.
“The latest market rally is not broadbased. The rise in Sensex is primarily due to increase in the prices of select stocks. Every rally has its favorites; the winners in the 2000 rally were entirely different from the current winners. Many mutual funds invested at various points in stocks that are yet to show an uptrend. As and when that uptrend happens, NAVs of the schemes will go up,” said Debasish Mallick, CEO and MD of IDBI Mutual Fund.
Most power and infrastructure schemes, essentially a long-term play, failed to reward investors and were heavily battered. While investors dropped these stocks, fund managers failed to do so.
Escorts Power &Energy Fund saw its NAV fall by 51.26 per cent to 9.12 from 18.71 three years ago. Sundaram Capex Opportunity Fund (down 49.44 per cent), Reliance Diversified Power Sector (down 49.38 per cent), and HDFC Infrastructure Fund (down 40.50 per cent) are some of the badly bruised schemes in infrastructure.
Among the performers in mid-cap schemes are BNP Paribas Mid-cap (up 13.75 per cent), HDFC Mid-cap Opportunities (up 5.27 per cent) and SBI Magnum Mid-cap (up 0.62 per cent). This when the BSE mid-cap index has fallen by 29.88 per cent in the three years.
Equity-focused schemes such as BNP Paribas Equity, ICICI Pru Top 100, SBI Magnum Global, Religare Invesco Equity, Axis Equity, Reliance Equity Opportunities, Mirae Asset India Opportunities, UTI Top 100, Franklin India Prima and IDFC Equity gave positive returns of 2 to 13 per cent.
Even schemes that gave positive returns failed to top the returns bank fixed deposits have given. This essentially means there is hardly a diversified scheme that has given real positive returns. So who made money? Given the contrarian strategy that a number hedge funds adopt, the probability is that they and funds that try to make money from arbitrage, are the ones which made money – certainly more money than domestic mutual funds.
(Rajiv Nagpal is director of an independent brokerage and consulting editor for