Most probably, you now know that there are over 300 equity mutual fund schemes. Some of them have managed to attract the largest investments from you. I call them the popular funds.
Typically, a scheme attracting more assets/investments due to its recent performance ( last 1 year, 3 year or 5 year). That is when the ranking and rating agencies put them up on the pedestal with high star ratings or No. 1 ranks.
Not to forget that even the fund begins chest thumping and lets the world know the champion it is. As a result, investors take notice and pump in more money.
I remember a conversation, from years ago, with a friend, who worked with a Mutual Fund. He mentioned that when the markets are rising the funds don’t need to do anything and when the markets go down, they can’t do anything.
I laughed out when I heard that.
Well, what I realise years later is that the true test of the fund is not as much about how it does in rising markets but how it does when the markets are on a slide.
Interestingly, no fund talks about its worst performance. Of course, it would also be foolish of it to do so!
The fund may not talk but you and I can.
I looked at some of the most popular funds and how they fared in their worst times. This is how I went about it.
I took some of the most popular equity funds, that is, having the largest assets under management or AUM. Equity funds are those that have at least 65% of their investments in Indian Stocks.
This is for 5 categories. The number in brackets is the number of funds taken in that category.
- Large cap funds (5)
- Flexi cap funds (5)
- Mid cap funds (5)
- Small cap funds (3)
- Hybrid – Equity funds (5)
Hybrid Equity funds have a stated objective to have a portion to invest in debt. Having said that, they invest at least 65% of their assets in stocks.
For each of these funds, I looked at the 1 year period in which they delivered their worst performance. This 1 year period is ANY 1 year period for the fund and not a fixed date range. Then I compared it with the change in the stated benchmark of the fund for the same period.
This data is for regular plans as well as direct plans.
All the data is sourced from Unovest and is as on Nov 5, 2016. The worst performance is a % and indicates the total fall in the value of the scheme for the period.
Here are the tables for you to see and make your own inferences.
Large Cap funds – worst performances
Flexi Cap funds – worst performances
Please note: ICICI Pru Value Discovery has only recently become a flexi cap fund, it was a mid cap fund previously.
Mid Cap funds – worst performances
Small Cap funds – worst performances
Hybrid Equity funds – worst performances
Uno Hybrid Equity is a custom benchmark index of Unovest and comprises of 65% of Nifty 500 and 35% of CCIL Bond Index. The CCIL Bond Index didn’t exist in March 2000-01 and hence the benchmark is shown as NA.
Please remember that the funds above are only the most popular ones with the highest AUM and not what you or I may prefer.
Also, the performance of direct plans is not as bad as regular plans because they have only been around for close to 4 years.
This exercise serves as a reminder that it is not always hunky dory with investing in stocks or equity mutual funds. They can fall and they can fall really bad.
Do you have the stomach for these worst performances?
Disclaimer: No portion of this post should be considered as investment advice or recommendations. Adequate efforts have been taken to ensure accuracy of data, but the same cannot be guaranteed.
