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Most debt-based mutual funds underperform in last 5 years

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In terms of returns to investors, most of the debt-based mutual funds in the country underperformed compared to their respective S&P benchmark indices, over the last five years, says a report.

The comparative analysis between debt-based funds and S&P India’s two benchmark indices — government bond index and bond index — is for the five years ended June 2014.

According to the report by S&P Dow Jones Indices, more than 78 per cent mutual funds in Indian government bonds failed to beat S&P India Government Bond Index, while 53 per cent Indian Composite Bond funds were outperformed by S&P India Bond Index.

“The interest rate remained higher and impacted the active managers in the Indian government bond peer group which underperformed the S&P India Government Bond Index over one, three and five-year periods,” Asia Index Private Ltd Senior Analyst Utkarsh Agrawal said.

“Almost a quarter of the funds in this peer group disappeared over the five-year period. Active managers in the Indian composite bond category also could not outperform the benchmark in the five-year period,” Agarwal added.

Moreover, as many as 54.36 per cent large-cap equity funds underperformed compared to their benchmark index, S&P BSE 100, in the last five years.

In comparison, only about 34.3 per cent Indian Equity Linked Savings Scheme (ELSS) funds and 38.6 per cent Indian Equity Mid/Small Cap funds underperformed their respective benchmark indices — S&P BSE 200 and S&P BSE Mid cap — in the five year period, the report said.

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