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CHAPTER: 5
PERFORMANCE EVALUATION OF MUTUAL FUNDS
SCHEMES UNDER DIFFERENT CATEGORIES
Introduction
Process of Financial Evaluation
Financial and Statistical Tools of Measurement
Techniques of Analysis
Closed-end v/s Open-ended Schemes: Indian Scenario
Trends
Performance Evaluation (Closed-end v/s Open-ended Schemes)
Performance Evaluation of Mutual Fund Equity Schemes
List of Selected 15 Equity Schemes
Performance based on Returns Generated by the Scheme
Performance based on Standard Deviation
Performance based on Beta
Performance based on Coefficient of Determination(R2)
Performance based on Sharpe Ratio
Performance based on Treynor Ratio
Performance based on Jenson‟s Alpha
169
Performance Evaluation of Schemes Under Categories Other than
Equity
List of Selected Schemes (Category wise)
Performance based on Returns Generated by the Scheme
Performance based on Standard Deviation
Performance based on Beta
Performance based on R-Square (R2)
Performance based on Sharpe Ratio
Performance based on Treynor Ratio
Performance based on Jenson‟s Ratio
170
CHAPTER: 5
PERFORMANCE EVALUATION OF MUTUAL FUNDS SCHEMES
UNDER DIFFERENT CATEGORIES
5.1 INTRODUCTION
Performance evaluation is a technique to evaluate past, current and projected
performance of a concern. Generally financial appraisal is concerned with the analysis of
financial statements. This analysis can be applied to any kind of detailed information of
financial data. The main purpose of this analysis is to evaluate whether the organization
use its resources effectively and efficiently or not. According to R. K. Anthony, ―The
overall objective of a business is to earn satisfactory return on the funds invested in it,
consistent with maintaining a sound financial position. According to S. K. Das, ―The
primary objectives of appraisal of financial statements are to determine the measure of
efficiency of operations or the profitability from its income statement and to appraise
financial strength as compared with similar situated concern.‖ Financial appraisals are
intended to give an accurate picture of the financial condition of a concern in condensed
form.
John C. Bogie (1970) described the unconventional approach to performance
evaluation seems more likely to provide solid ground for the measurement of the record
of an investment account. The formulation of this approach will endeavor to prove among
other these two basic points:
That the long held saying that risk and reward go hand in hand, in the sense that
the relationship between a fund‘s long-term average return and the variability of
that return from year to year fits a rather consistent pattern.
That the performance of fund groups (balanced, income/growth, growth and
aggressive are the categories used) bear a highly consistent relationship to the
171
action of the market and has in fact, been rather rigidly predictable. (It should be
emphasized that it is group relative performance that is predictable, not individual
fund performance nor absolute performance).
The majority of US studies conclude that actively managed portfolios, on average,
under perform market indices. For eg. Jensen (1968) and Sharpe (1966) argue
mutual funds underperform the market by the amount of expenses they charge the
investor. A study of Ippolito (1989), however, documented significantly positive
performance of US mutual funds when compared to Standard and poor‘500 Index
(S & P 500). The Ippolito article marked the renewed interest in mutual fund
performance measurement. Subsequently authors argued that Ippolito‘s results
were mainly driven by non-S&P 500 holdings in mutual fund portfolios. This led
to the emergence of extended models that control for several stock market
anomalies. For instance, fama and French, (1992, 1996) add proxies for size and
book-to-market, while Carhart (1997) introduces a stock-momentum variable.
Finally Ferson and Schadt (1996) explore the added value of introducing time-
varying betas and alphas in existing models. By doing this we take into account
the fact that fund managers change their portfolios over time, based on observable
information variables. Two models can be used for evaluating mutual fund
performance, one is conditional model and another is unconditional model.
5.1.1 Process of Financial Evaluation
Financial evaluation is generally directed towards evaluating the liquidity, stability and
profitability of a concern. The financial appraisal of a concern involves the following
steps:
1) Collection of financial data
2) Classification and tabulation of financial data
3) Application of appropriate techniques
172
5.1.2 Financial and Statistical Tools of Measurement
The tools like return, risk, and risk-free rate of return were used for risk-return analysis of
schemes in relation to that of the market as per Sharpe, Treynor and Jensen Models. The
major portion of funds mobilized through growth schemes are invested in equity shares.
In analyzing the risk-return relationship the CAPM is used widely. The CAPM uses the
concept of beta to link risk with return. Beta as a measure of systematic risk shows how
the NAV of a growth scheme responds to changes in market performance. Using the beta
concept the CAPM helps to define the required return on a security. The equation for
calculating the expected return based on CAPM is as follows:
Ri =
Ri = Expected return
Rf = Risk-free return
= Measure of systematic risk
Rm = Market return
The following tools of analysis adopted in this study were the same as used in the
previous studies by Carlson Robert S(1970), Fama Eugene(1972), Sarkar A K(1991),
Shashikant Uma(1993), Yadav R A(1996), Jayadev M(1996), Wilfred L Dellava(1998),
Gupta Amitabh(2000), Sondhi H J(2005), and others over the time period.
Portfolio Return refers to the yield from the selected growth schemes with growth
option. Portfolio returns (Rp) are calculated on the basis of changes in the NAV on a
weekly basis. Average of such weekly returns (ARp) is calculated on a yearly basis and
for the entire period of study as follows:
NAVt – NAVt-1
Rp = ----------------------
NAVt-1
Rp is the return of the portfolio on a weekly basis
‗t‘ is the time period
173
Market Return is calculated on the basis of the changes in the BSE 100 Index on a
weekly basis (Rm) and the averages of such weekly returns (ARm) are arrived at for every
year and for the total period of study. BSE 100 index was used as a benchmark for the
selected growth schemes as it is widely considered as a market proxy or benchmark for
the purpose of academics, research and practicing fund managers. BSE 100 index is used
as a benchmark as it is a broad based index, consisting of 100 actively traded equity
shares representing more than 70 percent of the total market capitalization in Bombay
Stock Exchange. The market return is calculated as follows:
Market Indext – Market Indext-1
Rm = ------------------------------------------
Market Indext-1
Risk is the uncertainty and variability of returns / capital appreciation or loss of both.
Total risk is measured with the help of standard deviation of both scheme and market
returns. The total risk of an investment consists of two components: Diversifiable and
non-diversifiable risk.
Diversifiable (Unsystematic) risk represents that portion of an investment‘s risk that can
be eliminated by holding enough number of varied types of securities. Unsystematic risk
is that portion of total risk calculated as follows:
Unsystematic Risk =
Standard Deviation of the Scheme
Standard Deviation of the Market
Non-diversifiable (Systematic) risk is that part of total variability in returns caused by
factors due to economic, social and political causes. Systematic risk is not unique to an
investment avenue and is unavoidable. Each security possesses its own level of
systematic risk, which is measured using beta coefficient.
174
Systematic Risk =
Beta reflects how volatile the return from an investment in response to market swings. It
measures the impact of the market forces on return expected from funds. Beta is
calculated by relating portfolio return with market return using regression analysis. Beta
greater than one, depicts high sensitivity of scheme‘s returns against market being
aggressive. Beta values less than one indicates defensive nature of the scheme. The
regression slope coefficient from the Characteristic Regression Line (CRL) measures the
systematic risk of an asset. The CAPM is applied to compute the beta value from the
following formula:
Ri =
Covariance reflects the degree to which the market and scheme returns vary. A positive
covariance means that the market and scheme returns move in the same direction whereas
a negative covariance implies that the return moves in the opposite direction. Covariance
is calculated using the formula:
C.V =
is the mean return of the scheme
Coefficient of Correlation (r) measures the nature and the extent of relationship
between stock market index return and the scheme‘s return for a particular period. The
co-movement of schemes performance with that of market index is studied with the help
of a simple linear regression analysis using the following formula:
175
Coefficient of Determination (R2) is the square of the correlation co-efficient and
indicates the degree of diversification. It gives the percentage variation in the scheme‘s
return as explained by the variation in the market‘s return. A low R2 indicates that
scheme has further scope for diversification and a high R2
indicates that the scheme is
well diversified.
5.1.3 Techniques of Analysis
The collected information was analysed using simple and sophisticated techniques as
follows:
Compound Annual Growth Rate (CAGR) calculates the growth in variables (number
of funds, funds mobilized, assets under management, number of schemes) on a yearly
basis.
CAGR = [(( P1 / P0 ) (1/n)
– 1) × 100]
P1 , P0, n are the variables in the current period, base period and the number of years
Compound Growth Rate (CGR) calculates the growth in variables for the entire period
of study. CGR is a superior measure of calculating compounded return than simple return
with the following formula:
CGR = [(( Pn / P0 ) (1/n)
– 1) × 100]
Rank Correlation is used when information is sufficient to rank the data. The rank
correlation coefficient is a measure of correlation that exists between two sets of ranks. It
is a measure of association that is based on the ranks of the observations and not on the
numerical values of the data as calculated using the following formula:
176
R = 1 -
R denotes coefficient of rank correlation
D refers to the difference of rank between the paired items in two series.
The models developed on the assumptions of ‗The Capital Asset Pricing Model‘ and
tested by Treynor (1965), Sharpe (1966), Jensen (1968) and Fama‘s Decomposition of
Returns was used to evaluate the performance of selected growth schemes.
Sharpe Index (St) measures the risk premium of the portfolio with reference to the total
amount of risk. The index St measures the slope of the line emanating from risk-free rate
outward the portfolio. The larger the St, the better the portfolio has performed. St is the
reward to
variability of the scheme‘s total risk and is a summary measure of scheme‘s performance
adjusted for risk.
St =
St = Sharpe Index
ARpt = Average return on portfolio‗t‘
Rf = Risk-free rate of return
= Risk involved in portfolio‗t‘ returns
Treynor Index (Tt) sums up the risk and return of a portfolio in a single number. The
index measures the slope of the line emanating outward from the risk-free rate to the
portfolio under consideration. Treynor index is a reward to volatility of the portfolio. The
characteristic line relates the market return to a specific portfolio return without any
direct adjustment
177
for risk. This line can be fitted through a least square regression involving a single market
portfolio. To use Treynor‘s measure first the CRL of portfolios are fixed by estimating
the following equation:
Rp = ap +bp Rm +ep
Rp Return on portfolio ‗p‘
ap Intercept coefficient for portfolio
bp Portfolio‘s beta coefficient
Rm Return on market index
ep Random error term for portfolio ‗p‘
Tt =
Jensen constructed a measure of absolute performance on a risk-adjusted basis while
Sharpe and Treynor models provided measures for ranking the relative performance of
various portfolios on a risk-adjusted basis. Equilibrium average return on a portfolio is
the benchmark. Equilibrium average return is the return of the market portfolio for a
given systematic risk calculated with the following formula:
EARp = Rf + (Rm - Rf) Bp
EARp is the equilibrium return of the portfolio ‗p‘ indicating superior / inferior
performance of the portfolio‘s alpha ( ). Jensen‘s Alpha is the intercept of the CRL. If
alpha is positive, the portfolio has performed better and if it is negative, scheme
performance is not up to the benchmark. In a well-diversified portfolio, the average value
of alpha of all stocks turns out to be zero.
The present research work is based on both primary and secondary data. The study is
from 2003, March 2013. The 35 top performing schemes were selected for analysis under
178
different categories. The primary sampling frame consists of seven fund managers, 20
brokers and 360 investors. The tools like return, risk and risk-free rate of return are used
as per Sharpe, Treynor and Jensen Models. The collected information was analysed using
simple and sophisticated techniques.
5.2 CLOSED-END V/s OPEN-ENDED MUTUAL FUND SCHEMES-INDIAN
SCENARIO
Earlier in the Indian market close ended schemes were more popular than the open ended
schemes till SEBI made some regulatory changes in close ended schemes such as
removal of initial issue expenses and ban on early exits by investors from these schemes
(2008-09).
Open ended schemes had been popular neither with individual investor nor with the
mutual fund organization as they were perceived by investors as less safe than close
ended mutual fund schemes in thought to provide liquidity to them through listing.
Mutual fund organizations also hesitated to offer genuinely open-ended schemes because
of insufficient liquidity of the Indian securities market. Liquidity is limited to a few
securities and even in these so called liquid securities, realization of sale proceeds take
several weeks after the trade. This hampers quick turnaround of funds through sale and
purchase of securities on delivery basis. Hence open-end funds can face cash problems if
there is a sudden surge of demand foe encashment of holdings by investors. Thus close
ended schemes dominated the Indian mutual fund scene. This is in contrast to the most
developed countries (like USA and UK) where open ended funds are more popular
because of their simplicity and reliability. The open-ended arrangement there assures the
investor that he will always be able to realize the NAV whereas listing does not.
In case of close ended funds liquidity to their holders are provided through listing of units
on stock exchanges. There are two problems here. First not all investors have easy access
to recognized brokers to execute a transaction on the stock exchange, second even listing
of units does not ensure active trading in them, as is true for many listed shares. Hence,
179
listing of a mutual fund schemes does not guarantee liquidity nor does it guarantee a price
equal to NAV. The day to day prices of units on the stock exchange have been to differ
from NAV, mostly being lower than NAV. There is no certainty about prices realization
in the case of listed units because all prices. On stock exchange keep on fluctuating
considerably. Further close ended schemes force on the investors three insurmountable
problems.
First at the time of redemption, the mutual funds dump the entire maturity proceeds on
the lap of the investors; even he does not need the money at that juncture. He is forced to
pay tax there on and reinvest the remaining funds in similar schemes. Secondly, such
close ended schemes may not be available to the investor when even he has investible
funds with him. Thirdly, close ended schemes continue to be listed even if the mutual
fund has its doors open for repurchase. The investor in distress goes to the market with a
hope to get money much earlier than what is possible through repurchase because it is
known fact that some of the mutual funds take undue time in making payment against
repurchases. The brokers in the market have been taking undue advantage of this
situation by managing to hold the prices at a heavy discount over the NAV. This market
price is not only heavily discounted to NAV, but investors also have to fork out
brokerage while selling units besides having to wait longer to get their money. However
when someone tries to buy the units at the quoted price he is not able to do so. The
jobbing difference is unreasonably high. On the other hand (from the investor point of
view) open ended funds have weighty advantages. Open-ended arrangement completely
assures liquidity whereas listing does not. The investor wanting to liquidate his holdings
sells directly to the mutual fund organization in the case of open-ended fund which is
simpler than going through brokers. The price which can be realized on sale will be
known to investor and is stable because it is tied to NAV. It thus gives investors a fair
exit route at zero discount to the NAV. An open ended scheme gives investors ‗real price‘
when they put in their redemption request. Since most of the open ended schemes
dispatch only statements of accounts in lieu of unit certificates, efforts associated with the
actual handling of stocks are greatly reduced.
180
These all have made open-ended schemes more popular with the investors in the later
part of 1993. Increasing popularity of open-ended funds was evident from the success of
UTI‘s US-64 scheme, which has a corpus of ₨17,000 crore and an investor base of 25
million and more recently by the madras based Kothari Prima Fund which grew 109% in
less than a year. The success of these two has encouraged others to go for open-ended
schemes and they are being backed by banks and financial institutions in their effort. At
least 20 new open funds hit the market with a corpus of ₨5,000 crore in the first quarter
of 1995. Other mutual fund likely to move fastest into this track is GIC mutual fund. GIC
mutual fund, which planned to capitalize on its Soros link, was planning to float at least
two open-ended schemes by March 1995, if one goes by its annual plan. The ICICI
mutual fund announced its open-ended schemes by the end of 1994. Also waiting in the
wings was Canbank mutual fund, which was planning to launch an open-ended scheme
on the lines of UTI-64 by December 94. Also SBI mutual fund found their way in the
market in early 95.
5.2.1 Trends:
Table 5.1: Total Number of Open-ended Schemes
Year Income
Schemes
Growth
Schemes
Balanced
Schemes
Liquid/
Money
Market
Schemes
Gilt
Schemes
ELSS
Schemes
Gold
ETF
Other
ETFs
Fund of
Funds
Investing
Overseas
Total
1998-99 35 39 11 17 -- -- -- -- -- 102
1999-00 43 66 17 18 13 11 -- -- -- 168
2000-01 60 91 28 26 17 18 -- -- -- 240
2001-02 94 101 31 31 29 18 -- -- -- 304
2002-03 98 115 33 32 31 20 -- -- -- 329
2003-04 120 124 34 36 30 19 -- -- -- 367
2004-05 131 149 34 39 30 20 -- -- -- 403
2005-06 139 190 34 45 29 26 -- -- -- 463
2006-07 133 206 34 55 28 29 1 -- -- 486
2007-08 209 221 31 58 30 30 5 8 -- 592
2008-09 163 244 30 56 34 35 5 12 10 589
181
2009-10 179 266 29 56 35 36 6 13 15 635
2010-11 210 318 31 51 37 36 10 18 16 727
2011-12 229 299 29 55 42 36 14 21 20 745
2012-13 237 292 31 55 42 36 14 23 21 751
The above table (5.1) shows the information about open-ended funds launched by various
mutual fund companies. The table (5.1) also reveals that Income Schemes and Growth
Schemes are launched more compare to other schemes. In the year 1998-99 no Gilt
Schemes and ELSS Schemes was launched. Gold ETFs were launched in 2006-07 and in
2007-08 Other ETFs came into existence. Fund of Funds Investing Overseas was
introduced on 2008-09.
Figure 5.1: Trend in Total Number of Open-ended Schemes (2000-2013)
182
The above Graph (fig 5.1) shows the data of open ended income schemes. In 1998-99 the
total numbers of scheme were 102 and in the year 2012-13 it reach to 751. The above
graph (fig 5.1) also shows an increasing trend of open-ended schemes. This trend shows
the popularity of open-ended schemes among investors which force AMCs to launch
more open-ended schemes than close-ended schemes.
The above table 5.1 also shows the trends of various open ended schemes since 1998-
99.The maximum number of Growth schemes (318) was launched in 2010-2011 and
maximum number of Income scheme (237) in 2012-2013. These two types of schemes
are more in trend than other types of schemes.
Table 5.2: Total Number of Various Closed-End Schemes
Year Income
Schemes
Growth
Schemes
Balanced
Schemes
ELSS
Scheme
s
Total
1998-99 36 44 6 60 116
1999-00 29 39 6 54 128
2000-01 31 19 4 62 116
2001-02 26 13 3 45 87
2002-03 13 5 2 27 47
2003-04 11 2 3 24 40
2004-05 28 2 1 17 48
2005-06 112 4 2 11 129
2006-07 234 21 4 11 270
2007-08 297 49 6 12 364
2008-09 280 47 5 12 344
2009-10 138 48 4 12 202
2010-11 346 9 1 12 368
2011-12 512 4 1 13 530
2012-13 481 6 1 13 501
The above table (5.2) provides the information regarding the total number of close ended
schemes launched by various mutual fund companies during the period of study. The
above table (5.2) also shows that the number of close-end schemes declines in the middle
183
year of the study then catches the pace of growth but still lags behind from open-ended
schemes. ELSS schemes are launched more compare to other schemes upto 2004-05.
From 2005-06 more Income schemes were launched as compared to other scheme.
Figure 5.2: Trend in Total number of Closed-end Schemes (2000-2013)
The above Graph presents the information of close-ended income schemes. The graph
shows that in the year 1998-99 total numbers of close-ended schemes was 116 and at the
end of year 2004-05 total number of schemes reduced to 48 but after that it started
increasing and at the end of 2012-13 it was 501 but still less popular in investors as
compare to its counterpart open-ended schemes.
184
The above table 5.2 shows the trend of various close-ended schemes since 1998-99.
Initially ELSS schemes were more popular but after 2004-05 Income schemes became
more popular. Maximum number of close end Income schemes was launched in 2011-12.
Currently this type of scheme is the only close-ended scheme is in trend in market. In
2012-13 only 6 Growth schemes, 1Balanced scheme and 13 ELSS schemes were
launched as compare to Income schemes.
During the boom in the markets between 2004 and 2008, we saw many fund houses
coming out with close-ended schemes. During that period, the performance of close-
ended schemes was not very inspiring to say the least.
The relative lack of popularity of closed-end funds can be explained by the fact that they
are a somewhat complex investment vehicle that tends to be less liquid and more volatile
than open-ended funds. Also, few closed-end funds are followed by Wall Street firms or
owned by institutions. After a flurry of investment banking activity surrounding an initial
public offering for a closed-end fund, research coverage normally wanes and the shares
languish.
5.2.2 Performance Evaluation (Closed-end v/s Open-ended):
Recently over the past few years, open-ended funds in each category—large-cap, mid-cap
and ELSS—have outperformed their closed-end peers. Open-ended funds also fared
better in the falling markets.
HSBC Unique Opportunities Fund (HUOF), an erstwhile closed-end fund that was
launched in February 2007, became open-ended. A mid- and small-cap-oriented fund,
HUOF was a three-year closed-end fund that had the option to convert into an open-
ended type, after three years. In these three years, the scheme barely managed to return
your principal; it returned just 0.13%, against open-ended mid-cap funds that returned
10.88%.
185
Figure 5.3: Trends in Large-Cap Funds (Closed-end v/s Open-ended)
(Returns in %)
Figure 5.4: Trends in some Closed-end and Open-ended (Large-Cap Funds)
186
Figure 5.5: Trends in Mid/Small-Cap Funds (Closed-end v/s Open-ended)
(Returns in %)
Figure 5.6: Trends in some Closed-end and Open-ended (Mid/Small-Cap Funds)
187
Figure 5.8: Trends in Equity linked Saving Schemes (ELSS) Funds
(Closed-end v/s Open-ended)
(Returns in %)
Figure 5.9: Trends in some Closed-end and Open-ended (ELSS Funds)
Returns as on March 26, 2010
188
When the capital market regulator, the Securities and Exchange Board of India banned
open-ended mutual fund (MF) schemes from amortizing their initial issue expenses in
April 2006, fund houses started launching closed-end funds. They claimed that on
account of the lock-in, closed-end funds would not allow premature withdrawals. This
would result in a stable corpus and closed-end funds would, therefore, outperform open-
ended funds in the long run.
But things did not go as planned. Over the past few years, open-ended large-cap, mid-cap
and equity-linked saving schemes (ELSS) funds has outperformed their closed-end peers.
Open-ended funds, on average, also outperformed their closed-end peers in the falling
markets of 2008 and the rising markets of 2009. For instance, in the large-cap space, the
best performing closed-end fund in 2009 was Birla Sun Life Pure Value Fund that
returned 91%, against Principal Large Cap (an open-ended fund) that topped the large-
cap open-ended space with returns of 110%.
Here‘s why fund houses went on a spree to launch closed-end funds. Earlier, MF schemes
were allowed to spend as much as 6% of amount they raised from the investors as initial
issue expenses. A ₨1, 000 crore new fund offer (NFO) would allow a fund to deduct ₨60
crore their initial issue expenses. Funds were allowed to amortize (write-off) this amount
over a maximum period of five years.
Some high net worth investors and companies began to extract their share of pie too.
They would often invest in these NFOs purely for listing gains that came with a bull run
and make a hasty exit soon after the scheme reopens for subscription. Long term
investors who stayed in the fund paid heavily due to higher costs.
Apart from the amortization of the NFO expenses, one of the reasons why closed-end
funds suffered was their premature withdrawals. Many closed-end funds offered quarterly
redemption window. Some, such as Tata Indo-Global Infrastructure Fund, offered
189
monthly redemptions, defeating the purpose of a proper closed-end fund. Although
premature withdrawals were penalized, investors withdrew systematically. For instance,
Franklin India Smaller Companies Fund (FISCF), a five-year closed-end mid-cap fund,
collected around ₨1, 200 crore when it opened. On account of its half-yearly
redemption window, investors withdrew money when markets started to fall. ―Our
experience has been that the liquidity windows did lead to redemptions and impact
performance to some extent along with our stock picks‖, says Sivasubramanian K.N.,
head of Franklin Equity Portfolio Management, Franklin Templeton Investments. As per
its February-end factsheet, FISCF‘s corpus is ₨585 crore. A rush for redemptions forces
fund managers to sell liquid stocks. What remains are, typically, illiquid stocks that take
time to recover. Says Nikhil Johri, managing director, Fortis Investment Management
(India) Pvt. Ltd: ―The problem with closed-end funds is that premature redemptions
happen but no new money is allowed to enter the fund. Hence, many times, it tends to sit
on far more cash than he ought to.‖
Experts are divided on whether or not the structure of a closed-end fund works. In the
initial years of funds in India, when public sector banks launched their mutual fund
houses, they launched closed-end funds, especially tax-saving funds, which matured after
5-10 years. Open-ended funds were not heard of in those days. Even private sector firm
that entered the MF space in 1993 launched closed-end funds to begin with. Franklin
India Bluechip Fund, one of Franklin Templeton India MF‘s most successful funds, was
launched as a three-year closed-end fund in December 1993. It became open-ended in
January 1997 and did very well across market cycles. ―The performance of the closed-
end funds is also dependent on the structure, whether it is a pure closed-end one or with
redemption windows‖, adds Sivasubramanian.
―Closed-end funds like fixed maturity plans work very well since the present regulations
do not allow premature withdrawals. The fund manager is therefore assured that panic
selling—to meet premature redemptions—will not be necessary,‖ says Johri.
190
Not all agree though. Some experts feel that fund managers of closed-end funds tend to
get lazy. Said Rakesh Goyal, senior vice-president, Bonanza Portfolio Ltd, a Mumbai-
based financial services company: ―Most fund managers of closed-end funds typically get
money for a three-year period. They, however, take it for granted that this money is going
to stick around for three years and markets would also keep rising. Hence, these funds are
seldom actively managed against open-ended funds that are actively managed funds.‖
Goyal added that in 2006 and 2007, most MFs got ―easy money‖ from investors as they
paid high commission to distributors who convinced investors that equity markets would
continue to rise.
Lack of monitoring can also affect closed-end funds. ―Fund managers did not pay
attention to their closed-end funds once money came in. They are usually told to pay
more attention and hence actively manage open-ended funds as they can be constantly
sold to investors and attract money‖, says a chief executive officer of a fund house.
The monetary benefit for MFs and distributors to launch closed-ended equity funds is
almost gone. Unless a closed-end fund offers something unique that no other successful
open-ended scheme offers, avoid closed-end funds.
Table 5.3: Some of the top performing Closed-end schemes (2012-13)
Scheme Name Category Last NAV 5 Year
Returns ₨/Unit Date
Tata Tax Advantage-1(G) ELSS 17.94640 15-07-2013 75.5%
Reliance ELSF series 1(G) ELSS 15.30330 15-07-2013 75.0%
IDFC Tax Saver Fund (G) ELSS 16.63570 15-07-2013 72.2%
UTI Long Term Advantage S2
(G)
ELSS 15.07940 15-07-2013 71.7%
UTI Master Equity Plan (US) ELSS 53.48440 15-07-2013 67.0%
191
UTI Long Term Advantage
(G)
ELSS 12.82230 15-07-2013 47.6%
SBI Tax Advantage Sr-1 G ELSS 11.73600 15-07-2013 46.5%
ING Retireinvest Sr I (G) Large Cap 12.18000 15-07-2013 38.1%
Religare Invesco AGILE Tax
(G)
ELSS 8.38000 15-07-2013 30.3%
Kotak Global Emerging Mkt.
(G)
International /
Global
Commodities
12.70700 12-07-2013 29.4%
Figure 5.9: Trends in some top performing closed-end schemes in different category at the end
of 2012-13 (on the basis of 5 year returns)
Schemes 5 Year Returns (%)
(Returns as on 15 July 2013)
Above graph (fig. 5.11) shows the information about some popular close-ended schemes
in the market. There is not much close-ended scheme in the market, thus above graph
depicts the performance evaluation on the basis of 5year returns only. According to this
192
evaluation Tata Tax Advantage-1(G) scheme gave the largest return as compared to other
schemes in the market. Reliance ELSF series 1(G) and IDFC Tax Saver Fund are also
nearby with 75% and 72.20% respectively , followed by UTI Long Term AdvantageS2
(G) and UTI Master Equity Plan (US) with 71.70% and 67 % respectively.
Further in this Chapter we will evaluate the performance of some more schemes widely
(on the basis on different parameters like return, beta, alpha, treynors ratio etc.) which are
most popular among investors irrespective of their nature (open ended or close-ended).
Currently there are 49 registered AMCs all have various type of schemes in different
categories. It is not possible to evaluate all in one chapter so we will take 5 top
performing funds houses. These are:
1. HDFC Mutual fund: HDFC Mutual Fund is a dominant player in Indian Mutual
with AUM of ₨94,843 crore at the end of March 2013. HDFC Asset Management
Company Ltd (AMC) was incorporated under the Companies Act, 1956, on
December 10, 1999, and was approved to act as an Asset Management Company
for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
In terms of the Investment Management Agreement, the Trustee has appointed the
HDFC Asset Management Company Limited to manage the Mutual Fund. The
paid up capital of the AMC is ₨ 25.241 crore as on March 31, 2013.
The equity shareholding pattern of the AMC as on March 31, 2013 is as follows:
Particulars % of the paid up equity
capital
Housing Development Finance Corporation Limited 59.81
Standard Life Investments Limited 39.87
Other Shareholders (shares issued on exercise of Stock
Options)
0.32
193
2. Reliance Mutual Fund: Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of
India‘s leading Mutual Funds with AUM of ₨83,691 crore at the end of March
2013. Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest
growing mutual funds in India. RMF offers investors a well-rounded portfolio of
products to meet varying investor requirements and has presence in 179 cities
across the country. Reliance Mutual Fund constantly endeavors to launch
innovative products and customer service initiatives to increase value to investors.
Reliance Capital Asset Management Limited (‗RCAM‘) is the asset manager of
Reliance Mutual Fund. RCAM is a subsidiary of Reliance Capital Limited (RCL).
Presently, RCL holds 65.23% of its total issued and paid-up equity share capital
and the balance of its issued and paid up equity share capital is held by other
shareholders which includes Nippon Life Insurance Company (―NLI‖), holding
26% of RCAM‘s total issued and paid up equity share capital. NLI acquired the
said 26% shareholding in RCAM on August 17, 2012.
Reliance Capital Ltd. is one of India‘s leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private equity and
proprietary investments, stock broking and other financial services.
3. ICICI Prudential Mutual Fund: ICICI Prudential Mutual Fund's Asset
Management Company (AMC) is ICICI Prudential Asset Management Co. Ltd.
The objective of ICICI Prudential Asset Management Co. Ltd. is to provide
distribution of income and also capital appreciation to the shareholders by
investing mainly in equity that is related to the shares of the companies that belong
to the development of infrastructure and the rest in debt shares and instruments of
money market that includes call money.
194
ICICI Prudential Mutual Fund was set up in May, 1998 and it has the parentage of
ICICI Bank as well as of Prudential plc. ICICI Prudential Mutual Fund has
attained an important position in the Mutual Fund industry in India. This mutual
fund company has started a large number of schemes so that it can meet the
different investment needs of its investors. The total assets under the management
of ICICI Prudential Asset Management Co. Ltd. came to around ₨77,629 crore at
the end of March 2013.
4.Birla Sun Life Mutual Fund: Birla Sun Life Asset Management Company Ltd.
(BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint
venture between the Aditya Birla Group and the Sun Life Financial Services Inc.
of Canada with AUM of ₨66,700 crore at the end of March 2013. The joint
venture brings together the Aditya Birla Group's experience in the Indian market
and Sun Life's global experience.
Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's
leading flagships of Mutual Funds business managing assets of a large investor
base. It offers a range of investment options, including diversified and sector
specific equity schemes, fund of fund schemes, hybrid and monthly income funds,
a wide range of debt and treasury products and offshore funds.
4. UTI Mutual Fund: The UTI Mutual Fund, the erstwhile Unit Trust of India, has
been one of the important institutions in the mutual fund sector of India. The UTI
Mutual Fund operates under the guidance of UTI Asset Management Company
Limited. The UTI Asset Management Company Limited manages the schemes of
the UTI mutual funds. As per estimates of 31st March 2013, the cumulative
amount of assets managed by the UTI Asset Management Company Limited
amounted to ₨58,046 crores.
The UTI Asset Management Company Limited operates as per the guidelines of
the UTI Trustee Company Limited for managing the schemes of UTI Mutual
195
Fund. UTI Mutual Fund has one of the widest ranges of investment schemes in
India and each scheme is tailor made to meet the financial goals of the investors.
Table 5.4: Number of Schemes Owned by all Fund Houses
Corpus (Cr.)
Mutual Fund Name No. of Schemes (Incl. Options) 31-Mar-13
AXIS Mutual Fund 194 12,256
Baroda Pioneer Mutual Fund 112 7,303
Birla Sun Life Mutual Fund 1,135 77,144
BNP Paribas Mutual Fund 759 3,726
BOI AXA Mutual Fund 91 1,104
Canara Robeco Mutual Fund 208 8,944
Daiwa Mutual Fund 33 266
Deutsche Mutual Fund 606 18,114
DSP Black Rock Mutual Fund 715 32,342
Edelweiss Mutual Fund 101 259
Escorts Mutual Fund 66 255
Franklin Templeton Mutual Fund 386 42,897
Goldman Sachs Mutual Fund 27 4,800
HDFC Mutual Fund 1,214 102,096
HSBC Mutual Fund 334 5,230
ICICI Prudential Mutual Fund 1,341 87,968
IDBI Mutual Fund 121 6,350
IDFC Mutual Fund 884 33,068
IIFL Mutual Fund 26 210
Indiabulls Mutual Fund 55 2,639
ING Mutual Fund 373 1,325
JM Financial Mutual Fund 298 7,411
JP Morgan Mutual Fund 154 15,856
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Above table (5.4) reveals that ICICI Prudential Mutual Fund owns the largest number of
schemes (1,341) with a corpus of ₨87,968 crore and HDFC Mutual Fund manages the
largest corpus of ₨102,096 crore with 1,214 number of schemes. Reliance mutual fund
manage the corpus of ₨96,851 crore with 1,064 number of schemes followed by Birla
Sun Life Mutual Fund has 1,135 number of schemes with corpus of ₨77,144 crore . UTI
has 811 number of schemes with a corpus of ₨69,450 crore. This data justifies our
selection of top 5 Fund House for the study.
Kotak Mahindra Mutual Fund 501 35,945
L&T Mutual Fund 381 11,169
LIC NOMURA Mutual Fund 231 7,185
Mirae Asset Mutual Fund 113 540
Morgan Stanley Mutual Fund 47 2,660
Motilal Oswal Mutual Fund 16 539
Peerless Mutual Fund 68 4,875
PineBridge Mutual Fund 104 1,099
PPFAS Mutual Fund 2
Pramerica Mutual Fund 101 2,592
PRINCIPAL Mutual Fund 229 5,573
Quantum Mutual Fund 13 293
Reliance Mutual Fund 1,064 96,851
Religare Mutual Fund 621 14,229
Sahara Mutual Fund 100 254
SBI Mutual Fund 614 55,760
Sundaram Mutual Fund 623 14,871
Tata Mutual Fund 672 19,897
Taurus Mutual Fund 175 4,731
Union KBC Mutual Fund 70 3,118
UTI Mutual Fund 811 69,450
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5.3 PERFORMANCE EVALUATION OF MUTUAL FUND EQUITY SCHEMES
A lot of contemplation has gone into deciding how long duration should be chosen to
analyze the schemes, finally decided to compare the scheme on 10 year duration because
of following reasons:
1. Long duration of last 10 years will cover both sides of market in best manner: one
of dream bull runs of market (2004-5 to 2007-08) as well as one of most difficult
phase of market which we are still undergoing since 2008(post Lehman crisis).
2. Although 3 & 5 year could have been considered long enough time but since
Indian markets (rather all world markets) have not been able to come out of
troubles which started flooding all world economies post Lehman crisis, taking
even 5 year duration also would have revealed only one side of story which can be
called as one of most difficult times for equity investors & fund managers. The fall
out of this down time can be gauged from observing sensex level of last 10 years
given below for better understanding. In other words, markets are still struggling
to touch their all-time high levels which they had posted around 5 year back in
Januray 2008.
Figure 5.10: Trends in Indian Stock Market (SENSEX 2004-12)
198
3. Since the ability of the scheme & fund manager to give good risk adjusted returns
can be best tested considering both up & down times, best performance appraisal
can be expected by taking into account such a long stretch.
4. This will include both bull & bear phases of market and hence brings at fore fund
managers ability to check the risk in difficult times as well as to test their
conviction in long term growth story of country.
5. Taking 10 years will include long journey of market, all the way from around
3500 sensex level to 19500 which we are at currently (as shown in chart above).
5.3.1 List of selected 15 equity schemes:
Table 5.5: List of selected 15 equity schemes with their AUM on April 2013 and Inception
Date
Scheme Name AUM Apr
2013
Inception
Date
HDFC Top 200 Fund 11697.96 11 Oct 1996
HDFC Equity Fund 11070.68 1 Jan 1995
HDFC Growth Fund 1152.58 11 Sep 2000
Birla Sun Life Frontline Equity Fund 3226.94 30 Aug 2002
Birla Sun Life Dividend Yield Plus 1244.65 26 Feb 2003
Birla Sun Life Equity Fund 678.38 27 Aug 1998
UTI-Mastershare 2306.50 3 Feb 1987
UTI-Equity Fund 2293.42 30 Jun 1992
UTI-MasterPlus 876.56 30 Jun 1992
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Reliance Growth Fund 4705.96 8 Oct 1995
Reliance Vision Fund 1645.64 8 Oct 1995
Reliance Banking Fund 1807.52 28 May 2003
ICICI Pru Dynamic Plan 3720.68 31 Oct 2002
ICICI Pru Top 200 Fund 466.68 1 Oct 1994
ICICI Pru Top 100 Fund 385.35 19 Jun 1998
This study examines 15 Equity schemes being launched by selected five mutual funds
namely HDFC, Birla Sun life, UTI, Reliance & ICICI Prudential. Other two parameters
for scheme selection are:
1. Scheme should have been in existence for last 10 years (as on June 30,2013) and
2. Three schemes of each fund house have been chosen on AUM basis in their
respective fund houses.
5.3.2 Performance based on returns generated by the Schemes:
Start Date: June 30, 2003
End Date: June 30, 2013
Returns are in CAGR (Compounded Annualised Growth Rate) terms.
Table 5.6: List of all selected equity schemes with their calculated 10 years return (CAGR) and
Ranking
Scheme Name Start Date NAV End Date NAV Return Ranking
HDFC Top 200 22.36 210.74 25.13 3
HDFC Equity 29.96 268.41 24.49 4
HDFC Growth 10.83 85.64 22.95 8
200
Birla Sun Life Frontline Equity 12.24 97.19 23 7
Birla Sun Life Dividend Yield 12.35 83.56 21.05 12
Birla Sun Life Equity 31.26 253.25 23.25 6
UTI Mastershare 12.55 56.32 18.63 14
UTI Equity 11.25 61.02 21.56 9
UTI Master Plus 19.2 89.42 18.53 15
Reliance Growth 38.62 430.69 27.25 1
Reliance Vision 35.04 247.04 21.55 10
Reliance Banking 10.3 107.28 26.38 2
ICICI Prudential Dynamic 12.83 109.45 23.89 5
ICICI Prudential Top 200 16.79 115.61 21.26 11
ICICI Prudential Top 100 22.31 146.12 20.66 13
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Figure 5.11: Chart based on table (5.6)
INFERENCE:
To draw meaningful inference from the table (5.6) above first we calculate the sensex
return in the same period (10 year CAGR as on June 30, 2013).
Sensex as on June 30, 2003: 3607
Sensex as on June 30, 2013: 19396
Now using formula:
CAGR = [(Ending Value ÷ Beginning Value)1/n
] – 1
CAGR= (19396/3607)1/10
-1
=1.1832-1
202
=.1832 or 18.32 %
1. As calculated above, we see that SENSEX has grown by 18.32 % CAGR in
corresponding period of 10 years. Comparing with same, we observe that all of
selected schemes have given better return than this market barometer. Also if we
see difference between Sensex growth rate (18.32%) and Average return of all
selected 15 schemes (22.64%), resultant difference of 4.32 % is quite
considerable, proving asset manager‘s efficiency in general to provide the
investors good returns on average basis.
2. Reliance Growth with 27.25 % annualized growth rate emerges as best return
giving scheme in the given period whereas UTI Master Plus comes last with 18.53
% returns.
3. Other schemes in top five are Reliance Banking Fund (26.38 %), HDFC Top
200(25.13), HDFC Equity Fund (24.49) and ICICI Prudential Dynamic Fund
(23.89 %). Whereas least returns giving schemes (Lowest 5 out of 15 selected
schemes) are ICICI Prudential Top 200(21.26 %), Birla Sun Life Dividend Yield
(21.05 %), ICICI Prudential Top 100 (20.66 %), UTI Mastershare (18.63 %), and
UTI Master Plus (18.53 %). Middle five are Birla Sun Life Equity (23.25%), Birla
Sun Life Frontline Equity (23%), HDFC Growth (22.95%), UTI Equity (21.56%),
and Reliance Vision (21.55%).
4. It can be observed that Reliance & HDFC Mutual Fund have maximum number of
high return schemes. Both have 2 schemes each in Top 5 schemes (Reliance
Growth & Reliance Banking, HDFC Top 200 & HDFC Equity Fund). Also none
of these two fund house has any scheme which is there in least performing 5
schemes. Proving Fund Houses‘ ability to manage their equity schemes in general.
203
5. UTI‘s two schemes are placed in last five schemes at bottom with 14th
(UTI
Master Share) & 15th
rank (UTI Master Plus) with 18.63 % & 18.53 % returns
respectively. Other fund house of which two schemes are there in least return
giving 5 schemes group is ICICI Prudential having schemes ICICI Prudential Top
200 & ICICI Prudential Top 100 with respective returns 21.26 % & 20.66%. Birla
Sun Life‘s two schemes are moderately placed in middle with CAGR return of
schemes Birla Sun Life Equity & Birla Sun Life Frontline Equity as 23.25% &
23% respectively.
One of its scheme Birla Sun Life Dividend Yield (21.05%) is in last five at 12th
position but still faring better than ICICI Prudential Top 100, UTI Mastershare &
UTI Master Plus.
While simple returns of a scheme is one important parameter by which overall
scheme performance is measured , it always should be seen in conjunction with
Risk & Volatility indicators (measured by Beta for systemic risk , Standard
deviation for total risk ), Variability measure (R2 to gauge diversification in a
scheme ) ,Sharpe & Trenyor Ratio (to measure excess return of a scheme over
risk free return with respect to per unit risk involved) & should be checked on
whether the fund manager has been able to create positive alpha .
We will be comparing all of these 15 selected equity schemes on the basis of
aforesaid parameters (for selected 10 year period) one by one.
5.3.3 Performance based on SD (Standard Deviation):
Table 5.7: List of all selected equity schemes with their calculated Standard Deviation and
Ranking
Scheme Name Standard Deviation Ranking
HDFC Top 200 25.67 9
204
HDFC Equity 26.67 11
HDFC Growth 24.95 6
Birla Sun Life Frontline Equity 24.79 3
Birla Sun Life Dividend Yield 25.26 8
Birla Sun Life Equity 27.87 13
UTI Mastershare 23.55 1
UTI Equity 24.84 5
UTI Master Plus unit 91 25.08 7
Reliance Growth 28.55 14
Reliance Vision 27.45 12
Reliance Banking 31.16 15
ICICI Prudential Dynamic 24.81 4
ICICI Prudential Top 200 26.14 10
ICICI Prudential Top 100 24.53 2
INFERENCE:
1. As standard deviation represents total risk (market risk, security specific risk and
portfolio risk) involved in the mutual fund, fund with low standard deviation is
preferred when the investor is more concerned about volatility of returns. A higher
SD number indicates that the net asset value (NAV) of the mutual fund is more
volatile and, it is riskier than a fund with a lower SD.
2. Other than above mentioned UTI Mastershare, Schemes having lower standard
deviation and hence are less volatile in returns around their mean are : ICICI
Prudential Top 100, Birla Sun Life Frontline Equity, ICICI Prudential Dynamic,
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UTI Equity Fund (forming top 5 schemes) whereas Schemes exhibiting
comparatively higher standard deviation or high volatility in their returns can be
clubbed as: HDFC Equity, Reliance Vision, Birla Sunlife equity, Reliance Growth
along with most riskiest fund Reliance banking Fund (in term of return volatility
around mean, as described in point 2).
3. HDFC Growth, UTI Master Plus unit 91, Birla Sun Life Dividend Yield, HDFC
Top 200 & ICICI Prudential Top 200 forms the middle part of ranking in the table
(5.7) above and can be described as schemes having medium risk (neither
extremely volatile nor very stable as well) and can be part of preferred portfolio
for investor having moderate risk appetite. Perhaps justified also, scheme in this
category HDFC Top 200 is largest equity scheme in the industry. Featuring in top
5 returns giving scheme earlier and now coming at medium or average level in
term of total risk measure standard deviation must have made the scheme most
favourite among investors.
5.3.4 Performance based on Beta:
Table 5.8: List of all selected equity schemes with their calculated Beta and Ranking
Scheme Name Beta Ranking
HDFC Top 200 0.92 11
HDFC Equity 0.94 13
HDFC Growth 0.87 6
Birla Sun Life Frontline Equity 0.88 7
Birla Sun Life Dividend Yield 0.78 1
Birla Sun Life Equity 0.98 15
206
UTI Mastershare 0.84 3
UTI Equity 0.89 8
UTI Master Plus unit 91 0.89 9
Reliance Growth 0.9 10
Reliance Vision 0.96 14
Reliance Banking 0.82 2
ICICI Prudential Dynamic 0.84 4
ICICI Prudential Top 200 0.92 12
ICICI Prudential Top 100 0.86 5
INFERENCE:
1. Beta is a measure of the volatility of a particular fund in comparison to the
scheme‘s benchmark or market as a whole, that is, the extent to which the fund's
return is impacted by market factors. By definition, the market benchmark index
has a beta of 1.All the funds above are having beta less than one, which shows
they are less risky compared to their benchmark index during this period.
2. As shown in table above, Birla Sunlife Dividend Yield plus has the lowest beta
0.78 whereas scheme- Birla Sun life equity has highest beta 0.98, hence out of
selected schemes, Birla Sunlife equity is most aggressive schemes & Birla
dividend yield plus is most conservative scheme.
Conservative investors should focus on mutual funds schemes with low beta. Aggressive
investors can opt to invest in mutual fund schemes which have higher beta which comes
at the cost higher risk associated with it.
207
5.3.5 Performance based on Coefficient of determination (R2):
Table 5.9: List of all selected equity schemes with their calculated Coefficient of
Determination (R2) and Ranking
Scheme Name R2 Ranking
HDFC Top 200 96.69 1
HDFC Equity 93.6 5
HDFC Growth 92.33 11
Birla Sun Life Frontline Equity 96.08 2
Birla Sun Life Dividend Yield 91.6 13
Birla Sun Life Equity 92.87 9
UTI Mastershare 94.64 4
UTI Equity 92.75 10
UTI Master Plus unit 91 95.16 3
Reliance Growth 93.44 6
Reliance Vision 91.72 12
Reliance Banking 89.51 14
ICICI Prudential Dynamic 86.99 15
ICICI Prudential Top 200 93.44 7
ICICI Prudential Top 100 93.3 8
INFERENCE:
1. R-squared measures the relationship between a portfolio and its benchmark. It
determines the extent to which scheme benchmark can be able to explain the
208
variation in the scheme. In other terms it shows how well a scheme‘s portfolio is
diversified.
2. Table (5.9) shows that HDFC Top 200 is having highest R2
value (96.69) whereas
ICICI Prudential Dynamic is having minimum value (86.99) & hence both are
placed at rank 1 & rank 15 respectively.
3. The low value of R2
indicates less diversification of the portfolio. Hence, One can
observe that schemes having comparatively lower R2
value namely as HDFC
Growth, Reliance Vision, Birla Sun Life Dividend Yield, Reliance Banking &
ICICI Prudential Dynamic score poor on this parameter(last 5 schemes in ranking)
compare to rest of the schemes.
5.3.6 Performance based on Sharpe Ratio:
Table 5.10: List of all selected equity schemes with their calculated Sharpe Ratio and Ranking
Scheme Name Sharpe Ratio Ranking
HDFC Top 200 0.78 2
HDFC Equity 0.75 4
HDFC Growth 0.74 5
Birla Sun Life Frontline Equity 0.74 6
Birla Sun Life Dividend Yield 0.67 10
Birla Sun Life Equity 0.7 8
UTI Mastershare 0.61 14
UTI Equity 0.68 9
209
UTI Master Plus unit 91 0.59 15
Reliance Growth 0.8 1
Reliance Vision 0.65 13
Reliance Banking 0.72 7
ICICI Prudential Dynamic 0.77 3
ICICI Prudential Top 200 0.66 12
ICICI Prudential Top 100 0.67 11
INFERENCES:
1. It is an excess return earned over risk free return per unit of risk involved, i.e. per
unit of standard deviation. Method utilizes a risk-adjusted return measurement &
Positive value of the index shows good performance
2. As high Sharpe ratio indicates more attractive fund. Reliance Growth Fund‘s
sharpe ratio is highest and hence schemes emerges as the best fund on this
parameter. Other 4 schemes which capture places in top quartile are HDFC Top
200, ICICI Prudential Dynamic, and HDFC Equity & HDFC Growth Fund.
3. Schemes scoring poor and placed at bottom five, are ICICI Prudential Top 100,
ICICI Prudential Top 200, Reliance Vision, UTI Mastershare & UTI Master Plus
unit 91.
4. UTI Master Plus Unit 91 is having minimum value of sharpe ratio among selected
15 schemes, so captures undesirable place of worst performing scheme based on
this widely used risk adjusted return measurement.
210
5. Scheme which find place in middle group of 5 average performers on this ration
values are Birla Sun Life Frontline Equity, Reliance Banking, Birla Sun Life
Equity, UTI Equity & Birla Sun Life Dividend Yield Fund.
5.3.7 Performance based on Treynor Ratio:
Table 5.11: List of all selected equity schemes with their calculated Treynor ratio and Ranking
Scheme Name Treynor Ranking
HDFC Top 200 20.59 4
HDFC Equity 20.04 5
HDFC Growth 19.8 6
Birla Sun Life Frontline Equity 19.62 8
Birla Sun Life Dividend Yield 19.66 7
Birla Sun Life Equity 18 10
UTI Mastershare 15.56 14
UTI Equity 18.9 9
UTI Master Plus unit 91 14.48 15
Reliance Growth 24.17 2
Reliance Vision 16.62 13
Reliance Banking 24.88 1
ICICI Prudential Dynamic 21.66 3
ICICI Prudential Top 200 16.97 12
ICICI Prudential Top 100 17.4 11
211
INFERENCE:
1. It is the excess return over risk free return per unit of systematic risk i.e. beta.
Here, too, all the schemes recorded positive value indicating there by that the
schemes provided adequate returns as against the level of risk involved in the
investment
2. In terms of Treynor ratio, top five performers are Reliance Banking, Reliance
Growth, ICICI Prudential Dynamic, HDFC Top 200 & HDFC Equity Fund.
Whereas at the other end, schemes which are in last five are ICICI Prudential Top
100, ICICI Prudential Top 200, Reliance Vision, UTI Mastershare & UTI Master
Plus unit 91.
3. Schemes which are average in terms of value of this risk adjusted return parameter
are HDFC Growth, Birla Sun Life Dividend Yield, Birla Sun Life Frontline
Equity, UTI Equity & Birla Sun Life Equity Fund.
5.3.8 Performance based on Jenson‟s Alpha:
Table 5.12: List of all selected equity schemes with their calculated Jenson’s Alpha and
Ranking
Scheme Name Jenson
alpha
Ranking
HDFC Top 200 5.75 3
HDFC Equity 5.62 4
HDFC Growth 4.96 6
Birla Sun Life Frontline Equity 4.77 7
212
Birla Sun Life Dividend Yield 3.77 10
Birla Sun Life Equity 4.35 9
UTI Mastershare 1.6 14
UTI Equity 4.62 8
UTI Master Plus unit 91 1.03 15
Reliance Growth 7.84 1
Reliance Vision 3.15 12
Reliance Banking 5.34 5
ICICI Prudential Dynamic 6.21 2
ICICI Prudential Top 200 3.2 11
ICICI Prudential Top 100 3.15 13
INFERENCE:
The analysis of the table reveals that all the schemes have positive Jenson‘s Measures
which is a token of better performance of a scheme with respect to its benchmark. It is
most widely used parameter to evaluate a fund manager‘s ability to reward the investors
with higher return than the benchmark to justify the risk taken in the underlying portfolio.
1. Reliance Growth has highest alpha value of 7.84 indicating fund manager has been
handsomely rewarding the investors in the scheme with excessive returns over the
benchmark with respect to underlying risk associated with portfolio selection.
2. The other good performers on this parameter are ICICI Prudential Dynamic,
HDFC Top 200, HDFC Equity & Reliance Banking Fund and forms bracket of top
five schemes along with top performer Reliance Growth Fund. Average five
213
schemes in middle bracket are HDFC Growth, Birla Sun Life Frontline Equity,
UTI Equity, Birla Sun Life Equity & Birla Sun Life Dividend Yield Fund.
3. Scheme UTI Master Plus unit 91 is having least value of alpha among the selected
schemes meaning scheme‘s positive return difference with respect to its
benchmark is not as high or excessive as other 14 schemes in the list with
associated risk in underlying portfolio. Although scheme‘s positive value is an
indicator scheme has beaten its benchmark but scores lower on comparative basis
with other schemes in the list. The other four schemes along with UTI Master Plus
91, which forms part of last five are ICICI Prudential Top 200, Reliance Vision,
ICICI Prudential Top 100 & UTI Mastershare.
5.4 PERFORMANCE EVALUATION OF SCHEMES UNDER CATEGORIES
OTHER THAN EQUITY
(1) Hybrid: Equity
(2) Equity Linked Saving Scheme
(3) Hybrid: Debt &
(4) Income
Since fund houses have number of equity oriented schemes, we could easily find 3
schemes which are in existence for last 10 years but same would not be possible in the
other categories like Hybrid equity, Hybrid debt, ELSS etc. which will be evaluated in
coming section, we have decided to evaluate the schemes in these categories on 7 years
period. Also as fund houses are not having multiple schemes under each category (like
reliance has only one hybrid equity scheme, HDFC has only one hybrid debt long term
schemes) we will take 1 scheme from each fund house for comparison. We will go for
scheme with higher AUM in case a fund house has multiple number of schemes in any
category.
214
5.4.1 List of selected schemes (category wise) is:
Table 5.13: List of all selected schemes other than Equity with their AUM on April 2013 and
Inception Date
Scheme
Category
Scheme Name AUM April
2013
Inception
Date
Equity Linked
Saving
Scheme(ELSS)
HDFC Tax Saver Fund 3353.59 31 Mar 1996
Birla Sun Life Tax Relief '96 1417.94 10 Mar 2008
ICICI Pru Tax Plan 1435.91 19 Aug 1999
Reliance Tax Saver (ELSS) Fund 1996.83 21 Sep 2005
UTI-Equity Tax Savings Plan 450.43 3 Jan 2000
Hybrid : Equity HDFC Prudence Fund 5854.30 1 Feb 1994
Birla Sun Life '95 Fund 588.71 10 Feb 1995
ICICI Pru Balanced Fund 494.04 3 Nov 1999
Reliance Regular Savings Fund 548.40 8 Jun 2005
UTI-Balanced Fund 931.69 2 May 1995
Hybrid : Debt HDFC Monthly Income Plan - LTP 5245.48 26 Dec 2003
Birla Sun Life MIP II - Wealth 25 201.28 22 May 2004
ICICI Pru MIP 25 648.42 30 Mar 2004
Reliance Monthly Income Plan 3410.42 29 Dec 2003
UTI-MIS Advantage Plan 533.23 1 Jan 2004
Income HDFC Income Fund 4929.82 11 Sep 2000
Birla Sun Life Income Fund 5063.60 3 Mar 1997
Reliance Income Fund 5106.93 1 Jan 1998
215
UTI-Bond Fund 2738.43 18 Jul 1998
ICICI Pru Income Plan 4441.82 26 Mar 2003
5.4.2 Performance based on returns generated by the Schemes:
Start Date: June 30, 2006
End Date: June 30, 2013
Returns are in CAGR (Compounded Annualized Growth Rate) terms.
Table 5.14: List of all selected schemes other than Equity with their calculated 7 years return
(CAGR) and Ranking
Scheme Category Scheme Name Start
Date
Nav
End
Date
Nav
Return Rank
Equity Linked
Saving
Scheme(ELSS)
HDFC Taxsaver 115.19 220.99 9.75 3
Birla Sun Life Tax Relief 96 143.08 74.89 9.56 4
ICICI Prudential Tax Plan 73.12 144.54 10.22 2
Reliance Tax Saver 10.85 21.89 10.54 1
UTI Equity Tax Savings 25.01 40.82 7.24 5
Hybrid : Equity HDFC Prudence 89.08 222.83 13.98 1
Birla Sun Life 95 142.31 338.42 13.16 2
ICICI Prudential Balanced 28.69 55.13 9.77 4
Reliance Regular Savings Balanced 10.93 24.15 11.99 3
UTI Balanced 46.9 84.06 8.69 5
Hybrid : Debt HDFC MIP Long-term 13.43 26.7 10.31 2
Birla Sun Life MIP II Wealth 25 12.45 21.05 7.79 5
ICICI Prudential MIP 25 12.98 23.24 8.67 4
Reliance MIP 12.61 25.98 10.87 1
216
UTI MIS-Advantage Plan 12.89 23.66 9.05 3
Income HDFC Income 16.19 27.95 8.1 5
Birla Sun Life Income 29.3 55.6 9.58 1
ICICI Prudential Income 20.52 38.61 9.44 2
Reliance Income 22.21 40.24 8.86 3
UTI Bond 20.87 36.39 8.26 4
Figure 5.12: Chart based on 7 year returns of ELSS
9.75
9.56
10.22
10.54
7.24
HDFC Taxsaver
Birla Sun Life Tax Relief 96
ICICI Prudential Tax Plan
Reliance Tax Saver
UTI Equity Tax Savings
7 year returns (%)
217
Figure 5.13: Chart based on 7 year returns of Hybrid: Equity
Schemes
Figure 5.14: Chart based on 7 year returns of Hybrid: Debt Schemes
218
Figure 5.15: Chart based on 7 year returns of Income Schemes
INFERENCE:
1. In ELSS category schemes, Reliance Tax Saver captures the top slot on returns
(CAGR) based comparison of five schemes from each fund house in the category.
This scheme has generated 10.54% return during the considered time period of 7
years. This is followed by ICICI Prudential Tax Plan (2nd
), HDFC Tax Saver (3rd
)
and Birla Sun Life Tax Relief 96 at 4th
position.
Worst performer out of the five selected schemes is UTI Equity Tax Savings with
7.24 % annualized returns in the same period.
2. In Equity oriented Hybrid category of schemes where normally 65-75% portfolio
is equity & 25-35 % is kept in debt, HDFC Prudence Fund is at the top with
13.98% CAGR return is last 7 year period. This scheme is followed by Birla Sun
Life 95 (2nd
with 13.16%), Reliance Regular Savings Balanced (3rd
with 11.99),
ICICI Prudential Balanced Fund(4th
with 9.77 % return).
219
3. UTI Balanced is at last position (5th
) with least annualized return in the category
(8.89%).
4. Schemes in the debt oriented hybrid category normally have 75 to 85% debt or
fixed income instruments and 15-25% equity portion in their portfolio. Because of
high proportion from debt or fixed income side, return in these schemes are far
less volatile in comparison to equity schemes and suitable for investors who seeks
regular dividends with less volatility in overall scheme returns.
4. Reliance Monthly Income Plan (MIP) is highest performer in this category suited
for conservative investors with annualized return rate of 10.87 %. Next three
schemes are HDFC MIP Long-term, UTI MIS-Advantage Plan, ICICI Prudential
MIP 25 with 10.31 %, 9.05% & 8.67% returns respectively. Birla Sun Life MIP II
Wealth 25 with 7.79% annualized return is least return generating scheme in this
category.
5. Income category of schemes invests in debt or fixed income instruments like
government and corporate bonds, T-bills etc. of various maturities and best suited
for investors who want to go for stable portfolio of schemes with least volatility.
Corporate treasuries also keep good part of their allocation in this category of
scheme offered by MFs.
Out of selected group of 5 schemes, Birla Sun Life Income Fund comes at the top with
9.58% annualized return in last 7 year period. Worst performing scheme in the category
is HDFC Income Fund with 8.1 % returns in the same period. Schemes placed between
these two extremes are ICICI Prudential Income, Reliance Income Fund & UTI Bond
Fund with 9.44%, 8.86% and 8.26% returns respectively.
220
5.4.3 Performance based on Standard Deviation:
Table 5.15: List of all selected schemes other than Equity with their calculated Standard
Deviation and Ranking
Scheme Category Scheme Name Standard
Deviation
Ranking
Equity Linked Saving
Scheme(ELSS)
HDFC Taxsaver 7.32 2
Birla Sun Life Tax Relief 96 8.82 5
ICICI Prudential Tax Plan 8.01 4
Reliance Tax Saver 7.55 3
UTI Equity Tax Savings 6.98 1
Hybrid : Equity HDFC Prudence 6.30 5
Birla Sun Life 95 5.94 3
ICICI Prudential Balanced 5.28 1
Reliance Regular Savings Balanced 6.07 4
UTI Balanced 5.61 2
Hybrid : Debt HDFC MIP Long-term 2.23 3
Birla Sun Life MIP II Wealth 25 2.49 5
ICICI Prudential MIP 25 2.34 4
Reliance MIP 2.22 2
UTI MIS-Advantage Plan 1.88 1
Income HDFC Income 1.76 2
Birla Sun Life Income 2.12 5
ICICI Prudential Income 2.08 4
Reliance Income 1.87 3
UTI Bond 1.67 1
221
INFERENCE:
1. On this parameter of volatility which is an indicator of total risk in a portfolio, in
ELSS category, UTI Equity Tax Savings scores maximum( Minimum SD value)
and comes on the top followed by HDFC Tax Saver, Reliance Tax Saver & ICICI
Prudential Tax Plan in the same order. Birla Sun Life Tax Relief 96 is having
maximum value of standard deviation and so most volatile around its mean, hence
comes in last as most riskiest fund.
2. In Hybrid equity oriented category of schemes, ICICI Prudential Balanced Fund is
having minimum SD value whereas HDFC Prudence Fund comes last (5th
) with
maximum SD . UTI Balanced Fund, Birla Sun life 95 & Reliance Regular Savings
Balanced comes at 2nd
, 3rd
& 4th
position respectively with SD value coming down
in same order.
3. In Hybrid debt oriented schemes UTI MIS-Advantage Plan has least Standard
deviation whereas Birla Sun Life MIP II Wealth 25‘s SD value is maximum in the
category and so comes last in five schemes. Reliance MIP, HDFC MIP LTP &
ICICI Prudential MIP 25 are placed in middle of them with 2, 3 & 4th
position
respectively.
4. UTI Bond Fund is having minimum standard deviation in Income Fund category,
whereas Birla Sunlife Income has maximum. UTI Bond fund is followed by
HDFC Income, Reliance Income & ICICI Prudential Income Fund due to
increasing value of standard deviation in same order.
5. It can be observed that schemes with higher allocation in equity have higher
standard deviation compare to schemes with debt oriented portfolio. Table shows
that Income & debt hybrid schemes‘ standard deviation is far less in comparison to
ELSS or equity hybrid schemes. This brings most fundamental thumb rule of
222
investment strategy which is that only aggressive investors should look into
investing in equity oriented schemes whereas investors with low risk appetite are
better off staying in debt oriented schemes. It is because of same reason that equity
schemes are considered good asset class only if investors have long term
investment horizon (to average out volatility) otherwise they are advised debt
schemes for short term investments.
5.4.4 Performance based on Beta:
Table 5.16: List of all selected schemes other than Equity with their calculated Beta and
Ranking
Scheme Category Scheme Name Beta Ranking
Equity Linked Saving
Scheme(ELSS)
HDFC Taxsaver 0.8422 2
Birla Sun Life Tax Relief 96 1.0572 5
ICICI Prudential Tax Plan 0.9097 4
Reliance Tax Saver 0.8616 3
UTI Equity Tax Savings 0.8327 1
Hybrid : Equity HDFC Prudence 1.1440 5
Birla Sun Life 95 1.0574 3
ICICI Prudential Balanced 0.9841 1
Reliance Regular Savings Balanced 1.0951 4
UTI Balanced 1.0566 2
Hybrid : Debt HDFC MIP Long-term 1.3189 3
Birla Sun Life MIP II Wealth 25 1.4656 5
ICICI Prudential MIP 25 1.4171 4
Reliance MIP 1.1666 2
UTI MIS-Advantage Plan 1.1370 1
223
Income HDFC Income 1.7540 2
Birla Sun Life Income 2.0408 4
ICICI Prudential Income 2.0500 5
Reliance Income 1.8352 3
UTI Bond 1.5431 1
INFERENCE:
1. In ELSS category, UTI Equity Tax Saving has lowest beta of 0.83. This is
followed by HDFC Tax Saver, Reliance Tax Saver, ICICI Prudentail Tax Gain &
Birla Sunlife Tax Relief 96. Only Birla Sun life Tax Relief 96 has beta value
above 1 (1.05, Maximum in all 5 schemes) which indicates that scheme‘s return
are more volatile compared to its benchmark index.
2. In Hybrid equity (Balanced category), ICICI Prudential Balanced fund is having
lowest systematic risk measured in beta terms, whereas HDFC Prudence Fund is
having highest beta. UTI Balanced Fund, Birla Sun life 95 & Reliance Regular
Savings Balanced fund find their place in the middle with 2,3 and 4th
position
respectively.
3. UTI MIS-Advantage Plan has lowest beta in Hybrid debt schemes whereas Birla
Sun Life MIP II Wealth 25 is having highest. Reliance MIP, HDFC MIP-LTP &
ICICI Pru MIP 25 are at 2,3,4th
rank respectively with increasing beta values in
same order.
4. In Income category, UTI Bond Fund has lowest beta whereas ICICI Prudential
Income is at last or 5th
position with highest beta. HDFC Income, Reliance Income
& Birla Sun life incomes find their places in between along with increasing order
of ranks as 2, 3 & 4th
.
224
5.4.5 Performance based on R-Square (R2
):
Table 5.17: List of all selected schemes other than Equity with their calculated R2 and
Ranking
Scheme Category Scheme Name R-Squared Ranking
Equity Linked Saving
Scheme(ELSS)
HDFC Taxsaver 94.56 3
Birla Sun Life Tax Relief 96 96.55 2
ICICI Prudential Tax Plan 92.14 4
Reliance Tax Saver 88.58 5
UTI Equity Tax Savings 96.76 1
Hybrid : Equity HDFC Prudence 88.51 3
Birla Sun Life 95 85.03 5
ICICI Prudential Balanced 93.20 2
Reliance Regular Savings
Balanced
87.24 4
UTI Balanced 95.12 1
Hybrid : Debt HDFC MIP Long-term 84.50 3
Birla Sun Life MIP II Wealth 25 83.60 4
ICICI Prudential MIP 25 88.67 1
Reliance MIP 66.69 5
UTI MIS-Advantage Plan 88.48 2
Income HDFC Income 85.69 1
Birla Sun Life Income 80.06 4
ICICI Prudential Income 83.92 2
Reliance Income 83.63 3
UTI Bond 73.60 5
225
INFERENCE:
1. In terms of R-Squared, which measures degree of variance in a scheme with
respect to its benchmark, UTI equity Tax savings scores the most whereas
Reliance Tax Saver comes last among category of ELSS schemes. Other schemes
Birla Sun life Tax Relief 96, HDFC Tax Saver & ICICI Prudential Tax Gain are
placed at 2nd
3rd
and 4th
position respectively with increasing value of R2
in the
same order.
2. In Hybrid Equity or balanced schemes, UTI Balanced has highest R2
value (95.12)
while Birla Sun life 95 has minimum R2 as 85.03.
3. ICICI Prudential MIP 25 is at top in Hybrid debt category with highest R2
value in
the category as 88.67 while Reliance MIP is at last (5th
) with R2
value of 66.69.
4. In Income category, HDFC Income Fund has highest R2
value of 85.69 whereas
UTI Bond is at bottom with R2
of 73.60. Other schemes ICICI Prudential Income,
Reliance Income & Birla Sun life Income are placed at 2nd
, 3rd
& 4th
position
respectively.
5. It is observed that debt schemes have less R2
figure in comparison to equity or
balanced (hybrid equity oriented) schemes in general.
5.4.6 Performance based on Sharpe Ratio:
Table 5.18: List of all selected schemes other than Equity with their calculate Sharpe Ratio
and Ranking
Scheme Category Scheme Name Sharpe
Ratio
Ranking
Equity Linked Saving
Scheme(ELSS)
HDFC Taxsaver 0.0578 3
Birla Sun Life Tax Relief 96 -0.0013 5
226
ICICI Prudential Tax Plan 0.0637 2
Reliance Tax Saver 0.0664 1
UTI Equity Tax Savings 0.0295 4
Hybrid : Equity HDFC Prudence 0.1063 1
Birla Sun Life 95 0.0989 2
ICICI Prudential Balanced 0.0568 4
Reliance Regular Savings
Balanced
0.0832 3
UTI Balanced 0.0411 5
Hybrid : Debt HDFC MIP Long-term 0.1004 2
Birla Sun Life MIP II Wealth 25 0.0144 5
ICICI Prudential MIP 25 0.0432 4
Reliance MIP 0.1197 1
UTI MIS-Advantage Plan 0.0644 3
Income HDFC Income 0.0255 5
Birla Sun Life Income 0.0776 1
ICICI Prudential Income 0.0738 2
Reliance Income 0.0562 3
UTI Bond 0.0333 4
INFERENCE:
1. Table above depicts value of Sharpe‘s reward to variability ratio (excess return
earned over risk free return per unit of risk involved, i.e. per unit of standard
deviation). Positive value of the index shows good performance.
2. In ELSS category of schemes, Reliance Tax Saver has highest positive Sharpe
ratio (0.0664). One of the five selected schemes in category, Birla Sun Life Tax
227
Relief 96‘s Sharpe ratio is negative which means schemes has performed very
poorly on this parameter and on average during last 7 years period under study,
could not reward the investors with any excess return over risk free rate of return.
3. HDFC Prudence Fund emerges as top fund in Equity oriented hybrid funds
category with positive Sharpe Ratio value 0.1063. Balanced fund from UTI comes
at last position with least value among five category peers. Birla Sun Life 95,
Reliance Regular Savings Balanced & ICICI Pru Balanced fund are placed in
between these two extremes in same order respectively.
4. In Debt oriented hybrid fund category, Monthly Income Plan from Reliance
secures first position with highest Sharpe Ratio of 0.1197. HDFC MIP, UTI MIS
Advantage Plan & ICICI Prudential MIP 25 comes at 2, 3 & 4th
place respectively.
Birla Sun Life MIP II Wealth 25 with Sharpe Ratio 0.0144 is least performing
fund in this category.
5. In Income Fund Section, Birla Income Fund is best fund on this parameter with
Sharpe Ratio of 0.0776 whereas HDFC Income Fund performs worst in category
with 0.0255 value of this ratio. Income Schemes from ICICI Prudential, Reliance
& UTI comes at 2nd
, 3rd
& 4th
position respectively with decreasing order of
Sharpe Ratio as shown in the table.
5.4.7 Performance based on Treynor Ratio:
Table 5.19: List of all selected schemes other than Equity with their calculated Treynor Ratio
and Ranking
Scheme Category Scheme Name Treynor Ratio Ranking
Equity Linked Saving
Scheme(ELSS)
HDFC Taxsaver 5.03 3
Birla Sun Life Tax Relief 96 -0.11 5
ICICI Prudential Tax Plan 5.61 2
228
Reliance Tax Saver 5.82 1
UTI Equity Tax Savings 2.47 4
Hybrid : Equity HDFC Prudence 5.85 1
Birla Sun Life 95 5.55 2
ICICI Prudential Balanced 3.05 4
Reliance Regular Savings Balanced 4.61 3
UTI Balanced 2.18 5
Hybrid : Debt HDFC MIP Long-term 1.70 2
Birla Sun Life MIP II Wealth 25 0.24 5
ICICI Prudential MIP 25 0.71 4
Reliance MIP 2.28 1
UTI MIS-Advantage Plan 1.07 3
Income HDFC Income 0.26 5
Birla Sun Life Income 0.81 1
ICICI Prudential Income 0.75 2
Reliance Income 0.57 3
UTI Bond 0.36 4
INFERENCE:
1. Above table 5.19 shows Treynor of the schemes which is the excess return over
risk free return per unit of systematic risk i.e. beta. Here, too, Tax Saving Scheme
from Reliance fund house (Reliance Tax Saver) is at top in ELSS category with
highest Treynor Ratio 5.82 followed by ICICI Prudential Tax Gain, HDFC Tax
Saver & UTI equity Tax Savings in same order with decreasing values of this
parameter. Birla Sun Life Tax Relief 96 shows negative value as -0.11, placing the
fund in last position among peers & indicating that scheme could not surpass even
229
risk free rate of return and thus failing to reward the investors for his/her risk
undertaken.
2. In equity oriented hybrid schemes HDFC Prudence (5.85) comes at top followed
by Birla Sun life 95, Reliance regular savings balanced, ICICI Prudential Balanced
Fund. UTI Balanced fund is with least Treynor value & hence captures last or 5th
position among its peers in same category.
3. Reliance Monthly Income Plan (MIP) has highest value of Treynor ratio(2.28) and
hence performs best on this parameter in its category of debt oriented hybrid
section of schemes whereas Birla Sun Life MIP II Wealth 25 finds undesired
position at last with least Treynor 0.24. Monthly Income Plans from HDFC, UTI
& ICICI Prudential are at 2nd
, 3rd
and 4th
rank respectively as shown in table.
4. Income Fund category has Birla Sun Life Income as top performing scheme on the
basis of this risk-return reward parameter followed by ICICI Prudential Income,
Reliance Income & UTI Bond Fund at 2nd
,3rd
and 4th
place respectively.
HDFC Income fund with Treynor Ratio of 0.26 comes last in the category.
5.4.8 Performance based on Jenson‟s Alpha:
Table 5.20: List of all selected schemes other than Equity with their Jenson’s Alpha and
Ranking
Scheme Category Scheme Name Jenson's
Alpha
Ranking
Equity Linked Saving
Scheme(ELSS)
HDFC Taxsaver 0.0861 3
Birla Sun Life Tax Relief 96 -0.4731 5
ICICI Prudential Tax Plan 0.1462 1
Reliance Tax Saver 0.1151 2
230
UTI Equity Tax Savings -0.1671 4
Hybrid : Equity HDFC Prudence 0.3818 1
Birla Sun Life 95 0.3210 2
ICICI Prudential Balanced 0.0524 4
Reliance Regular Savings
Balanced
0.2296 3
UTI Balanced -0.0352 5
Hybrid : Debt HDFC MIP Long-term 0.1927 2
Birla Sun Life MIP II Wealth 25 0.0010 5
ICICI Prudential MIP 25 0.0675 4
Reliance MIP 0.2384 1
UTI MIS-Advantage Plan 0.0941 3
Income HDFC Income 0.1313 5
Birla Sun Life Income 0.2651 1
ICICI Prudential Income 0.2545 2
Reliance Income 0.1952 3
UTI Bond 0.1316 4
INFERENCE:
1. This is one of the most appropriate performance parameter to ascertain any fund‘s
overall performance and to measure fund manager‘s ability to reward investors on
risk adjusted return basis. Higher Positive value of Jenson‘s alpha indicates good
market timing ability of fund managers as regards investment in securities.
2. We can observe from the table that in ELSS category, two out of five schemes -
Birla Sun Life Tax Relief 96 & UTI equity tax savings have negative alpha values,
meaning that schemes have performed very poorly on risk adjusted basis & could
231
not beat even their benchmark index. ICICI Prudential Tax Plan comes at the top
with highest Jenson‘s alpha 0.1462, followed by Reliance Tax Saver & HDFC Tax
Saver schemes at 2nd
and 3rd
place respectively.
3. In Equity oriented hybrid category of schemes, HDFC Prudence Fund emerges as
clear winner with Jenson alpha 0.3818. Only UTI Balanced Fund is having
negative alpha in this category placing it at last rank. Other three schemes with
positive alpha are Birla Sun Life 95(0.3210), Reliance Regular Savings Balanced
Fund (0.2296) & ICICI Prudential Balanced (0.0524) placing them at 2nd
,3rd
and
4th
position respectively.
4. In Debt oriented hybrid category of schemes, Reliance MIP is having highest
value of this parameter as 0.2384 and hence at the top whereas Birla Sun Life MIP
II Wealth 25 is placed at the other extreme in last with very low value as 0.0010.
HDFC MIP Long-term, UTI MIS - Advantage Plan & ICICI Prudential MIP 25
are placed in the middle at 2nd
, 3rd
& 4th
rank respectively. All five schemes are
showing positive values (although scheme at bottom just crossing the hurdle by
negligible margin).
5. Birla Sun Life Income fund is having highest value of Jenson‘s alpha (0.2651) and
thus emerges as the best scheme on this parameter among the peers in income
category. Other four schemes are ICICI Prudential Income (0.2545), Reliance
Income (0.1952), UTI Bond (0.1316) & HDFC Income Fund (0.1313) in
decreasing order of Jenson‘s alpha values and hence at 2nd
, 3rd, 4th & 5th
position
respectively. Here, point to note is that all income schemes are having positive
values and thus not disappointing the investors as providing them better return
than benchmark on risk-adjusted basis.