Mutual Fund Asset Class Returns 31Dec2023
(This
is for information purposes only. This should not be construed as a
recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial
adviser before taking any investment decision. Safe to assume the author has a vested
interest in stocks / investments discussed if any.)
This is an update of an earlier blog
posted on 01Oct2023. Now, an analysis of the data as at the end of 31st of December, 2023 is presented here. The data contain select categories of mutual funds in
India, numbering sixteen, from equity, debt and commodity (gold)
categories.
(the blog continues below)
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Related Blogs on Mutual Funds:
NSE Indices (Nifty 50, Nifty Next 50, Nifty 100 and Nifty 500) Comparison 31Dec2022
Who is Eating My Gold ETF Return?
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Table 1: Asset return matrix - annual returns (top to bottom returns in 2023) >
Please click on the image to view better >
Table 1 above reveals:
> asset class returns are cyclical in nature
>
gold exchange traded funds (ETFs) did well both in calendar years 2023 and 2022 and their returns are similar in those two years
> Credit risk funds did well in 2022, but provided tepid returns in 2023
> except credit risk fund category, several of the debt fund categories did relatively well in 2023 compared to 2022
>
equity small- and mid- cap funds did badly in 2022; but in 2023, they performed spectacularly giving
highest returns of 43 and 40 percent respectively
>
equity flexi cap did poorly in 2022, but the category
performance has improved in 2023
> Equity international funds too fared well in 2023
> in 2023, Arbitrage funds provided the highest annual returns in eight years and liquid fund returns in 2023 are the best in the past five years
The
above table 1 is presented below, with the same data, but in alphabetical order
>
Please click on the image to view better >
Table
3: Asset return matrix - trailing returns (10-year returns top to bottom) with category AUM or assets under management
>
Please click on the image to view better >
What
table 3 above reveals is:
> Small-cap
equity funds have provided best returns on a 10-year trailing returns basis,
though they have provided negative returns as a category in 2022, 2019 and 2018
> however, investors in
small-cap equity funds have to tolerate higher volatility and it’s in the
nature of equities to suffer from volatility of returns
> inflows into
small- and mid-cap equity funds have been very high in the past one year; going
forward, it would be better to be cautious on these funds for conservative
investors
> interestingly, equity large-cap and aggressive hybrid fund categories have provided similar returns on a 10-year annualised return (CAGR or compounded annual growth rate) basis -- as aggressive hybrid funds' volatility is considerably lower, their Sharpe ratio (risk-adjusted return) must have been superior to that of large-cap equity category
> multi asset allocation category has done reasonably well on a 10-year basis, but gilt funds have failed to generate inflation-beating returns in the same period
> the 3-year CAGR of gilt funds at just 3.8 percent (as on 31Dec2023) is one of the worst in recent years
> on a 5-year compounded returns basis, gold has provided decent returns, but failed to impress on a 10-year basis
> table 3 provides assets under management (AUM) of respective category as of 31Dec2023, so that readers can have a sense of the popularity of the mutual fund categories among investors
> Of course, fund
size is a double-edged sword, in euphoric times, investors tend to flock
to a particular category boosting asset size and this might prevent that
category from future performance
The
above table 3 is presented below, with the same data, but in alphabetical order
>
Please click on the image to view better >
This blog is the first reference point for young and prospective
investors to understand the cyclical nature of mutual fund returns.
Note: SEBI introduced norms SEBI categorization and rationalization of mutual funds in October 2017. So, AMCs (asset management companies) made several changes to the mutual fund plans shifting them from one MF category to another MF category and data aggregators changed the data retrospectively. As such, before interpreting trailing returns of more than five years (annual returns before 2018), please be aware of SEBI categorization rules.
- - -
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References and Additional data:
1. Important information relating to SEBI categorization and rationalization of mutual fund plans introduced in 2017:
3. X post / Tweet thread dated 28Jan2024 on strange phenomenon of multi cap funds outperforming flexi cap funds
4. Raw data from Value Research > Annual and Trailing Returns >
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Read more:
BSE 500 versus S&P 500 Indices Compare 31Dec2023
BSE Broad and Sector Indices Returns 31Dec2023
BSE Broad and Sector Indices Market cap 31Dec2023
Disclosure: I've vested interested
in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if
any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
CFA Charter credentials - CFA Member Profile
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