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The Old GUARD.

An analysis of recent performance of mutual funds launched before 2000

IF WE say that HDFC Top 200, Reliance Growth and SBI Magnum Tax Gain are household names, it'll be an exaggeration. But to say that these funds have made many people millionaires in the last 15- 18 years is not an overstatement.

These funds have delivered very good returns over the past one- and- a- half decade and continue to do well despite hitches on the way.

As the year comes to a close, we decided to look at the recent performance of some mutual fund schemes launched in the 1990s.

With the year coming to a close, we listed equity and equity- oriented hybrid funds launched before 2000 and then narrowed the list to funds that have given 15 per cent or more annual returns since launch. To prune the list further, we removed funds that managed less than ` 500 crore on September 30. This left us with 23 funds from 10 mutual fund houses.

We then checked how these funds have been rated by Value Research every quarter starting January 2007.

While fund houses such as HDFC, Franklin Templeton, Reliance and SBI dominated the list, schemes from ICICI Prudential, DSP BlackRock, UTI and Birla Sun Life also made their presence felt.

While some of these funds continue to be high on the ratings chart, some have shown a fall in performance of late. A few others have managed difficulties of the last five years well and regained glory after a spell of ordinary performance.

Our list also includes funds such as Birla Sun Life Tax Relief ' 96 and Franklin India Prima which have continued their ordinary performance throughout this period.

HDFC Top 200, HDFC Prudence, HDFC Equity, Franklin India Bluechip, Franklin India Prima Plus, DSP BlackRock Equity and DSP BlackRock Balanced were rarely inconsistent, while ICICI Tax Plan, Birla Sun Life Equity 95 and Tata Pure Equity steadied their ship after mediocre initial performance starting 2007. How did these funds, despite the cyclical nature of equity markets, manage a stellar performance? " We stick to basics, ignore momentum stories that reflect the short term and focus on building a portfolio of companies creating value for shareholders. This helps us provide superior risk- adjusted returns to investors in line with the fund's investment objective," says Sivasubramaniam KN, chief investment officer, equity, Franklin Templeton Investments India.

According to Chintan Haria, senior fund manager, ICICI Prudential Mutual Fund, " A strong process ensures that the fund sticks to mandate, working to deliver superior longterm risk- adjusted returns." Haria has been managing ICICI Prudential Tax Plan since May 2011.

And then there are funds which were the shining stars but have lost their sheen over the last three- five years. We look at some of these funds and their performance during the last five years.

SBI Magnum TaxGain ' 93: Launched in 1993, the fund has been a top performer for years.

This is evident from the ` 4,500 crore it manages, the largest assets under management, or AUM, of any fund in the tax- saving category.

By returning 17.5 per cent a year since launch and over 32 per cent in the last 10 years, it's performance is the envy of many. But it has of late struggled to come anywhere close to its long- term returns. In the five years to November 9, it has given an abysmal return of below 1 per cent a year, and is ranked 15th in the category on the basis of returns.

In the last three years, it has returned 5.2 per cent a year, 26th best in its category.

The slump is reflected in the fund's ratings. It was rated fivestar in the March 2009 quarter.

Within a year, it lost its sheen and was rated three- star, which it has maintained ever since.

One positive, though, is that it has been able to consistently beat its benchmark, the BSE 100 index, in terms of three- year rolling returns since April 2012. However, it continues to trail peers.

Reliance Growth Fund: This fund has given 25 per cent annual return since its launch in 1995. It is one of the largest equity fund with AUM of ` 5,500 crore. This mid- and small- cap fund returned 33 per cent a year in the 10 years to 9 November 2012, the second- best in the category after Sundaram Select Mid- cap.

However, the recent slump, particularly since the start of 2011- 12, has investors and analysts worried. In the five years to November 9, it has returned 3.25 per cent a year, as against the category average of 2.2 per cent. It is ranked 12th in the category in fiveyear returns.

Birla Sun Life Tax Relief ' 96: Despite its mediocre performance in the past five years, the fund has delivered 27 per cent annual return since its launch in 1996 and 23 per cent over the past 10 years. This, however, doesn't give it a hall- offame status, as performance has recently become worse with rating falling to two- star. It has eroded investors' money by over 2 per cent annually in the past five years while managing to generate a miserly 2.5 per cent a year over the past three years.

Sundaram Tax Saver: A five- star fund not so long ago ( last rated on September 2009), its performance has gradually declined vis- avis the category average in the past three years.

Launched in 1999, it manages close to ` 1,400 crore and has generated 19 per cent a year since then, as against the benchmark ( BSE 200) return of 14 per cent. During the last 10 years, it has returned 27 per cent a year. What has queered the pitch is the performance since 2009. The fund failed to beat the category ( tax saving) average by two percentage points in the three years to November 9. It could give only 4 per cent a year as against the category average of 6 per cent and the benchmark return of 3.69 per cent.

Funds such as Birla Sun Life Tax Relief ' 96 and Franklin India Prima have continued their ordinary performance throughout this period

Reliance Growth Fund has given 25 per cent annual return since its launch in 1995. It is one of the largest equity fund with AUM of ` 5,500 crore

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Publication:Mail Today (New Delhi, India)
Date:Dec 24, 2012
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