50% giant largecap and midcap mutual fund schemes underperform category

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Five out of the biggest 10 largecap schemes delivered lower returns than their category average in the three-year period. Half of 10 giant midcap schemes also underperformed the category (see table below). We have taken top 10 schemes in the decreasing order of their latest Assets Under management (AUM).

Similar trend was witnessed in five-year period performance as well. Around 40 per cent of the giant largecap schemes and 30 per cent midcap schemes underperformed their category average.

The results shows that small-sized schemes in the category have generated higher returns than larger ones.

As per data from ACE Mutual Fund, biggest ten largecap schemes hold Rs 91,116 crore AUM which forms 69 per cent of the total category AUM. In the midcap category, giant funds hold, 71 per cent of total category AUM, which is huge.

Now, the big question: does a scheme become unmanageable as it grows in size? Mutual fund analysts believe that the data doesn’t support such a claim. They believe that there is no connection between the size of a scheme and its performance. Suresh Sadagopan, founder of Ladder7 Financial Advisories, a financial planning and wealth management firm, says, “Indian market provides ample opportunities to mutual fund schemes specifically looking to invest in largecap and midcap stocks, and thus these schemes should face no trouble.”

There might be other reasons, say analysts. For example, funds which have performed better might have grasped certain opportunities which the underperforming funds have missed.

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Via:: Economic times – Wealth


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