Active fund managers faced a challenging time mirroring the up-move charted by indices in 2020, with 81% of significant-cap equity indices failing to outperform the S&P BSE one hundred index, information sourced by S&P Dow Jones Indices showed. The underperformance is not just restricted to significant-cap funds, but a higher percentage of ELSS funds, mid-cap, tiny-cap and even government bond funds have lagged benchmarks more than the one year period ending December 2020. Equity markets soared in the course of the period immediately after possessing nose-dived earlier in the year owing to the coronavirus pandemic.
“Over the one-year period ending in December 2020, the S&P BSE 100 was up 16.84%, with 80.65% of funds underperforming the benchmark. Over the second half of 2020, 100% of the funds underperformed the S&P BSE 100,” S&P wrote in its most up-to-date SPIVA India Scorecard report. The comparative index for ELSS funds, the S&P BSE 200 was up 17.92% in 2020. It outperformed 65.12% of the actively managed funds in the category. Similarly, the benchmark for mid-cap and tiny-cap funds, the S&P BSE 400 MidSmallCap Index, was up 26.76% more than the one-year period ending in December 2020. 67% of the mid-cap and tiny-cap funds failed to mirror such a move.
The story was equivalent in the fixed revenue category. Half of the Government Bond funds had been underperformed the S&P BSE India Government Bond Index when more than 90% of Composite Bond funds lagged the efficiency of the S&P India Bond index.
“In 2020 India joined markets across the world facing extraordinary volatility due to COVID-19,” mentioned Akash Jain, Associate Director, Global Research & Design, S&P Dow Jones Indices. He added that the second half of 2020 was a especially difficult period for Indian equity active funds exactly where one hundred% of the significant-cap funds, 80% of the ELSS funds and 53% of the mid-cap and tiny-cap funds underperformed their respective benchmarks.
Data showed that actively managed equity funds have underperformed peers even more than longer periods of time. More than 87% of significant-cap funds underperformed BSE one hundred more than 3-year and 5-year time frame, when 68% lagged the index in the 10-year time frame. While most other folks have lingered, 35% of mid-cap and tiny-cap equity funds fared far better than their benchmark more than 3-year and 10-year time period. However, 54% of these mid-cap and tiny-cap funds have underperformed more than the 5-year period.
The underperformance more than many years has led to some actively managed funds shutting shop. Over the final year, practically 4% of significant-cap, mid-cap and tiny-cap funds failed to survive. Among ELSS funds, the quantity is up at 5%.