Do large AUM equity funds perform better than others?
Be it fund distributors, fintechs or individual advisors, giant equity funds are quite popular. Naturally, MF investors too have an inherent bias for those mutual funds that manage tens of thousands of crores in assets. Size matters, many believe. But is big meaningful in terms of returns for investors? Here is an analysis of the largest equity schemes vis a vis category returns over various time periods.
Flexicap fund category
The biggest flexicap fund out there is Kotak Flexicap Fund (formerly Kotak Standard Multicap). Launched in 2009, this fund is the biggest actively managed scheme in the industry with over Rs 38,000 crore assets. Returns are not outstanding. In the last 1 year period, Kotak Flexicap has gained 50.3 per cent versus flexicap category returns of 55.4 per cent. In the 3 year period, the biggest fund has gained 15.8 per cent CAGR versus flexicap category returns of 16.71 per cent returns. In the 5 year period, the fund has clocked 14.94 per cent CAGR versus flexicap category gains of 14.96 per cent return. The fund only betters category returns in the 10 year timeframe.
ELSS fund category
In the tax-saving space, Axis Long Term Equity is the biggest. It is also the 2nd largest actively managed equity scheme of the MF industry. Launched in December 2009, the Axis scheme has earned many accolades. Unlike the Kotak Flexicap, Axis Long Term Equity doesnt seem to be lagging behind category returns. In the 1 year period, the Axis tax-saving fund has given 61.96 per cent gain versus ELSS category rise of 56.02 per cent. In the 3 year period, Axis Long Term Equity has generated 19.36 per cent CAGR vis a vis the 16.27 per cent CAGR of tax-saving category. The popular ELSS fund (18.02 per cent CAGR) has also beaten its category (14.81 per cent CAGR) in the 5-year period as well as in the 10 year period, consistently generating alpha.
Largecap fund category
Axis MF also shares the unique distinction of the biggest actively managed largecap scheme. Axis Bluechip Fund, though launched in January 2010 and much younger than many peers, is the biggest by virtue of its AUM of over Rs 32,000 crore. Though the fund has struggled in the 1 year period to beat the category i.e. fund return at 51.15 per cent vs category return of 54.10 per cent, it has delivered alpha over 3-, 5- and 10 year periods. The alpha is between 2-3 per cent CAGR in these period, quite respectable and do not forget that Axis Bluechip also has out-performed a benchmark such as BSE 100.
|AUM Rs Cr
|Axis Long Term Equity
|Axis Bluechip Fund
|HDFC Mid-cap Opportunities
|ICICI Pru Value Discovery
|As on Sep. 17, 2021
Midcap fund category
HDFC Mid-Cap Opportunities Fund, launched in 2007, has over the years consolidated its position as the industry’s biggest midcap fund, with latest AUM of Rs 31,000 crore. This is clear when you see the next largest in this niche category at half its size. However, HDFC Mid-Cap Opportunities has flattered to deceive in terms of performance. Though it has shown flashes of brilliance, the fund has under-performed category returns in 1-, 3- and 5-year periods. Though the fund has delivered good returns, its failure to consistently be on top of category returns is a worrying trend. The fund however has logged 19.34 per cent CAGR in the 10 year period, edging past midcap fund category gains of 18.94 per cent CAGR in the same time frame.
Value fund category
Value investing is one of those investing styles every fund manager preaches, but very few can actually practice it. ICICI Prudential Value Discovery Fund by virtue of its AUM size (latest Rs 21,800 crore) is the big kahuna here. Because value stocks do not perform well all the time, returns can be quite lumpy. ICICI Pru Value Discovery has had a patch record against category peers. While the fund has gained 58.4 per cent in 1 year period, value fund category has clocked 60.6 per cent in the same time. In 3-year period, the biggest value fund has shown 15.6 per cent CAGR growth in NAV, out-performing category return of 14.7 per cent CAGR. However, the fund under-performed in 5-year period with 13.53 per cent CAGR compared to value fund category gain of 13.88 per cent CAGR. Of course, the fund has done well over 10-year period with 18.27 per cent CAGR vs. category rise of 16.02 per cent CAGR.