{"id":260,"date":"2019-05-08T11:45:40","date_gmt":"2019-05-08T11:45:40","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=260"},"modified":"2019-05-09T08:10:22","modified_gmt":"2019-05-09T08:10:22","slug":"why-over-exposure-by-popular-fund-houses-may-be-hazardous-to-your-portfolio","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/05\/08\/why-over-exposure-by-popular-fund-houses-may-be-hazardous-to-your-portfolio\/","title":{"rendered":"Why Over Exposure To Popular Fund Houses May Be Hazardous To Your Portfolio"},"content":{"rendered":"\n

What are the essentials of a winning portfolio? <\/p>\n\n\n\n

Does it pivot on scheme selection, star ratings of a\nfund, or accurate risk profiling? <\/p>\n\n\n\n

In fact the human bias influences all your financial\ndecisions. And this is precisely what hinders your portfolio from trumping the\nmarkets. <\/p>\n\n\n\n

For e.g.: If you\u2019re an investor who decides to invest in a fund because A) You\u2019re impressed with the media interviews of a fund manager or the Chief Investment Officer (CIO) of a fund house;
or B) Excited by the returns a fund houses generated in the recent past;
or C) Ten d to rely only on a few mutual fund<\/a> houses that are big, popular and park all your hard-earned money with just those few, you can expect the returns of your mutual fund portfolio to disappoint you. <\/p>\n\n\n\n

As a seasoned investor yourself, you\u2019re probably aware that\nthe key to a winning portfolio is diversification. <\/p>\n\n\n\n

The mistake most investors usually makes is investing\nin popular schemes offered by some of industry\u2019s largest fund houses. When you\nare overexposed to a particular fund house, you are more likely to get negative\nsurprises<\/p>\n\n\n\n

Effective diversification isn\u2019t always about having a\ncertain number of schemes in a portfolio. But holding a portfolio that\u2019s truly\ndiversified in the nature of the schemes selected and asset class allocation.<\/p>\n\n\n\n

Isn\u2019t it time to keep your bias out of mutual fund\ninvesting and understand how to intelligently diversify?<\/p>\n\n\n\n

To clarify the importance of diversification,<\/p>\n\n\n\n

let\u2019s take a look at the table below.<\/p>\n\n\n\n

Table 1<\/strong>: Ten largest fund houses of Indian Mutual Fund Industry\u2026<\/em><\/strong><\/p>\n\n\n\n

\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t
AMC Name<\/strong><\/td>\n\t\t\tAverage AUM (Rs in crore)<\/strong><\/td>\n\t\t<\/tr>\n\t\t
HDFC Mutual Fund<\/a><\/td>\n\t\t\t342,524.7<\/td>\n\t\t<\/tr>\n\t\t
ICICI Prudential Mutual Fund<\/a><\/td>\n\t\t\t321,281.2<\/td>\n\t\t<\/tr>\n\t\t
SBI Mutual Fund<\/a><\/td>\n\t\t\t284,123.6<\/td>\n\t\t<\/tr>\n\t\t
Aditya Birla Sun Life Mutual Fund<\/a><\/td>\n\t\t\t246,696.0<\/td>\n\t\t<\/tr>\n\t\t
Reliance Nippon Life Mutual Fund<\/a><\/td>\n\t\t\t234,292.5<\/td>\n\t\t<\/tr>\n\t\t
UTI Mutual Fund<\/a><\/td>\n\t\t\t159,694.2<\/td>\n\t\t<\/tr>\n\t\t
Kotak Mahindra Mutual Fund<\/a><\/td>\n\t\t\t150,271.3<\/td>\n\t\t<\/tr>\n\t\t
Franklin Templeton Mutual Fund<\/a><\/td>\n\t\t\t119,932.8<\/td>\n\t\t<\/tr>\n\t\t
Axis Mutual Fund<\/a><\/td>\n\t\t\t89,767.7<\/td>\n\t\t<\/tr>\n\t\t
DSP Mutual Fund<\/a><\/td>\n\t\t\t78,362.7<\/td>\n\t\t<\/tr>\n\t<\/tbody>\n<\/table><\/center>\n\n\n\n

Data as on May 06, 2019 <\/p>\n\n\n\n

(Source: ACE MF)<\/p>\n\n\n\n

We evaluated the equity-diversified schemes offered by top-10\nfund houses (based on AUM) for our analysis and ranked them on their yearly performance\nover the last five years. Clearly, no particular scheme has outperformed\/underperformed\nconsistently. <\/p>\n\n\n\n

What\u2019s the right approach?<\/p>\n\n\n\n

Let\u2019s find out. <\/p>\n\n\n\n

Table 2<\/strong>: No clear winner\u2026<\/em><\/strong><\/p>\n\n\n\n

\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t
Scheme Name<\/strong><\/td>\n\t\t\tReturns (Absolute %)<\/strong><\/td>\n\t\t<\/tr>\n\t\t
2019 (YTD)<\/strong><\/td>\n\t\t\t2018<\/strong><\/td>\n\t\t\t2017<\/strong><\/td>\n\t\t\t2016<\/strong><\/td>\n\t\t\t2015<\/strong><\/td>\n\t\t\t2014<\/strong><\/td>\n\t\t<\/tr>\n\t\t
Franklin India Focused Equity Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t8.8 <\/font><\/td>\n\t\t\t-7.7<\/td>\n\t\t\t39.0<\/td>\n\t\t\t6.3<\/td>\n\t\t\t3.0<\/td>\n\t\t\t81.3<\/td>\n\t\t<\/tr>\n\t\t
HDFC Top 100 Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t7.5<\/td>\n\t\t\t0.9<\/td>\n\t\t\t32.9<\/td>\n\t\t\t9.3<\/td>\n\t\t\t-5.5<\/font><\/td>\n\t\t\t47.4<\/td>\n\t\t<\/tr>\n\t\t
ICICI Pru Focused Equity Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t6.0<\/td>\n\t\t\t-1.7<\/td>\n\t\t\t24.9<\/font><\/td>\n\t\t\t12.1<\/td>\n\t\t\t-4.1<\/td>\n\t\t\t40.7<\/td>\n\t\t<\/tr>\n\t\t
Axis Multicap Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t4.4<\/td>\n\t\t\t8.8 <\/font><\/td>\n\t\t\t–<\/td>\n\t\t\t–<\/td>\n\t\t\t–<\/td>\n\t\t\t–<\/td>\n\t\t<\/tr>\n\t\t
HDFC Growth Opp Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t3.7<\/td>\n\t\t\t-3.7<\/td>\n\t\t\t29.5<\/td>\n\t\t\t4.1<\/td>\n\t\t\t-4.8<\/td>\n\t\t\t27.8<\/font><\/td>\n\t\t<\/tr>\n\t\t
Aditya Birla SL Equity Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t2.8<\/td>\n\t\t\t-3.0<\/td>\n\t\t\t35.1<\/td>\n\t\t\t16.2 <\/font><\/td>\n\t\t\t3.9<\/td>\n\t\t\t58.0<\/td>\n\t\t<\/tr>\n\t\t
DSP Small Cap Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t2.2<\/td>\n\t\t\t-25.1<\/font><\/td>\n\t\t\t43.4<\/td>\n\t\t\t13.6<\/td>\n\t\t\t21.2<\/td>\n\t\t\t103.1<\/td>\n\t\t<\/tr>\n\t\t
Reliance Multi Cap Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t1.9<\/td>\n\t\t\t-1.5<\/td>\n\t\t\t42.0<\/td>\n\t\t\t-5.9<\/font><\/td>\n\t\t\t1.2<\/td>\n\t\t\t60.9<\/td>\n\t\t<\/tr>\n\t\t
SBI Small Cap Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t1.2<\/td>\n\t\t\t-18.6<\/td>\n\t\t\t80.4<\/font><\/td>\n\t\t\t2.6<\/td>\n\t\t\t22.3<\/font><\/td>\n\t\t\t112.8 <\/font><\/td>\n\t\t<\/tr>\n\t\t
UTI Mid Cap Fund(G)-Direct Plan<\/a><\/td>\n\t\t\t-4.1<\/font><\/td>\n\t\t\t-14.2<\/td>\n\t\t\t43.3<\/td>\n\t\t\t4.4<\/td>\n\t\t\t7.5<\/td>\n\t\t\t91.8<\/td>\n\t\t<\/tr>\n\t\t
NIFTY 50 \u2013 TRI<\/strong><\/td>\n\t\t\t7.1<\/strong><\/td>\n\t\t\t4.6<\/strong><\/td>\n\t\t\t30.3<\/strong><\/td>\n\t\t\t4.4<\/strong><\/td>\n\t\t\t-3.0<\/strong><\/td>\n\t\t\t32.9<\/strong><\/td>\n\t\t<\/tr>\n\t\t
NIFTY 500 \u2013 TRI<\/strong><\/td>\n\t\t\t4.2<\/strong><\/td>\n\t\t\t-2.1<\/strong><\/td>\n\t\t\t37.7<\/strong><\/td>\n\t\t\t5.1<\/strong><\/td>\n\t\t\t0.2<\/strong><\/td>\n\t\t\t39.3<\/strong><\/td>\n\t\t<\/tr>\n\t<\/tbody>\n<\/table><\/center>\n\n\n\n

Data as on May 06, 2019 for the calculation of YTD returns<\/p>\n\n\n\n

Top performing schemes of respective years are in green while\nthe bottom performers are in red.<\/p>\n\n\n\n

Source: (ACE MF)<\/p>\n\n\n\n

*Please note, this table only represents the best and worst performing schemes of largest 10 mutual funds based solely on past returns and none of them is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for an indicative purpose. Speak to your investment advisor for further assistance before investing.
<\/font><\/span><\/center>\n\n\n\n

<\/p>\n\n\n\n

For example, HDFC Top 100 Fund(G)<\/a> was the worst-performer in 2015 among schemes offered by 10-largest fund houses. But in 2019, it\u2019s performed well so far. <\/p>\n\n\n\n

On the other hand, SBI Small Cap Fund<\/a> was performing exceedingly well between 2014 and 2017. However, the fund lost its track since 2018. Imagine those who betted heavily on this fund at the beginning of 2018 are most likely disappointed now. <\/p>\n\n\n\n

Moreover what\u2019s noteworthy is, the  schemes ranked at the top or bottom of the\nladder haven\u2019t been from the same fund house consistently. <\/p>\n\n\n\n

What goes true for individual schemes is also true for the overall\nperformance of a fund house across market cycles. In the table below, we have\nhighlighted the performance of the top 10 fund houses.<\/p>\n\n\n\n

Table 3: Performance across market cycles\u2026<\/em><\/strong><\/p>\n\n\n\n

\n\t\n\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t\n\t\t\t
Scheme Name<\/strong><\/td>\n\t\t\tReturns (Absolute %)<\/strong><\/td>\n\t\t\tReturns (CAGR %)<\/strong><\/td>\n\t\t\tReturns (CAGR %)<\/strong><\/td>\n\t\t<\/tr>\n\t\t
Bear Phase <\/strong><\/td>\n\t\t\tBull Phase<\/strong><\/td>\n\t\t\tCorrective Phase<\/strong><\/td>\n\t\t<\/tr>\n\t\t
03\/Mar\/15 To 25\/Feb\/16<\/strong><\/td>\n\t\t\t25\/Feb\/16 To 23\/Jan\/18<\/strong><\/td>\n\t\t\t23\/Jan\/18 To 06\/May\/19<\/strong><\/td>\n\t\t<\/tr>\n\t\t
Axis Mutual Fund<\/td>\n\t\t\t-10.5<\/font><\/td>\n\t\t\t21.2<\/font><\/td>\n\t\t\t3.3<\/font><\/td>\n\t\t<\/tr>\n\t\t
Kotak Mutual Fund<\/td>\n\t\t\t-16.4<\/td>\n\t\t\t35.5<\/td>\n\t\t\t-2.5<\/td>\n\t\t<\/tr>\n\t\t
UTI Mutual Fund<\/td>\n\t\t\t-19.8<\/td>\n\t\t\t29.5<\/td>\n\t\t\t-3.2<\/td>\n\t\t<\/tr>\n\t\t
HDFC Mutual Fund<\/td>\n\t\t\t-20.3<\/font><\/td>\n\t\t\t39.5 <\/font><\/td>\n\t\t\t-4.4<\/td>\n\t\t<\/tr>\n\t\t
ICICI Prudential Mutual Fund<\/td>\n\t\t\t-18.6<\/td>\n\t\t\t33.6<\/td>\n\t\t\t-5.2<\/td>\n\t\t<\/tr>\n\t\t
Franklin Templeton Mutual Fund<\/td>\n\t\t\t-15.5<\/td>\n\t\t\t33.4<\/td>\n\t\t\t-5.7<\/td>\n\t\t<\/tr>\n\t\t
SBI Mutual Fund<\/td>\n\t\t\t-11.6<\/td>\n\t\t\t35.0<\/td>\n\t\t\t-6.1<\/td>\n\t\t<\/tr>\n\t\t
DSP Mutual Fund<\/td>\n\t\t\t-17.5<\/td>\n\t\t\t36.2<\/td>\n\t\t\t-6.1<\/td>\n\t\t<\/tr>\n\t\t
Aditya Birla Sun Life Mutual Fund<\/td>\n\t\t\t-16.4<\/td>\n\t\t\t37.6<\/td>\n\t\t\t-7.0<\/td>\n\t\t<\/tr>\n\t\t
Reliance Nippon Mutual Fund<\/td>\n\t\t\t-19.9<\/td>\n\t\t\t39.3<\/td>\n\t\t\t-7.1<\/font><\/td>\n\t\t<\/tr>\n\t\t
NIFTY 50 \u2013 TRI<\/strong><\/td>\n\t\t\t-21.7<\/strong><\/td>\n\t\t\t29.2<\/strong><\/td>\n\t\t\t5.0<\/strong><\/td>\n\t\t<\/tr>\n\t\t
NIFTY 500 \u2013 TRI<\/strong><\/td>\n\t\t\t-20.1<\/strong><\/td>\n\t\t\t33.6<\/strong><\/td>\n\t\t\t-1.6<\/strong><\/td>\n\t\t<\/tr>\n\t<\/tbody>\n<\/table><\/center>\n\n\n\n

Top performing mutual fund houses of respective years are in\ngreen while the bottom performers are in red.<\/p>\n\n\n\n

(Source: ACE MF)<\/p>\n\n\n\n

We considered the average returns\ngenerated by all diversified schemes of the same fund house during the last\nthree market phases to arrive at the performance of a particular fund house. <\/p>\n\n\n\n

Then we ranked them in a\ndescending order. Inferences are shocking. <\/p>\n\n\n\n

For instance, Axis Mutual Fund\nwas the worst performing fund house during the last bull phase. But in the\non-going corrective phase, it\u2019s the top-performer. In contrast, Reliance Nippon\nLife Mutual Fund generating massive returns in the previous bull market.\nNonetheless, in the current corrective phase, it\u2019s losing ground abysmally. <\/p>\n\n\n\n

Investors who had invested excessively in Reliance Nippon Life Mutual Fund<\/a> at the beginning of 2018 could be repenting now. The same would be true for an investor who shunned Axis Mutual Fund<\/a>, due to their bias and\/or lack of foresight, during the same period. <\/p>\n\n\n\n

Now the pertinent question is\nwhat caused the divergence in the returns \nvarious mutual fund schemes and fund houses generated?<\/p>\n\n\n\n

Several factors that affect the returns includes:<\/strong><\/p>\n\n\n\n