Indian Mutual Funds: 49% Beat Benchmarks Since Launch

Nearly half of the actively managed equity schemes launched by new Indian asset management companies (AMCs) have outperformed their benchmarks since inception. A recent analysis revealed that 19 out of 39 eligible schemes, representing 49%, successfully beat market benchmarks.

The Indian mutual fund sector has seen significant expansion, with 14 new AMCs entering the market since June 2021. This influx has led to a varied performance landscape for new investment vehicles.

Key Performance Metrics

• New AMCs launched since June 2021: 14
• Actively managed equity schemes reviewed: 39
• Schemes outperforming benchmarks: 19 (49%)

Performance trends among these newer AMCs show considerable divergence, with most funds operating for less than three years. This limited operational history makes it challenging to definitively attribute returns solely to long-term skill.

Top Performers Emerge

Bajaj Finserv Mutual Fund has emerged as a strong performer, with eight out of its nine eligible schemes surpassing their respective benchmarks. Helios Mutual Fund also demonstrated robust results in the review period.

• Bajaj Finserv Mutual Fund schemes outperforming: 8 out of 9
• Helios Mutual Fund schemes outperforming: 4 out of 5

Conversely, some new firms have faced challenges in matching benchmark returns. Samco Mutual Fund, for instance, recorded underperformance across a majority of its schemes.

• Samco Mutual Fund schemes underperforming: 7 out of 8
• Other firms noting similar challenges: NJ Mutual Fund, Jio BlackRock Mutual Fund, The Wealth Company Mutual Fund

Strategic Divergence and Sectoral Plays

A key strategic difference observed among funds was portfolio turnover. Helios Mutual Fund maintained a significantly lower turnover rate compared to Samco Mutual Fund, indicating differing approaches to investment adjustments.

• Samco Mutual Fund equity schemes portfolio turnover: 1,022%
• Helios Mutual Fund portfolio turnover: 33%

Sector positioning played a critical role in determining returns. Outperforming funds strategically reduced exposure to IT services and large private-sector banks, instead favoring specific domestic growth areas.

• Favored sectors by outperformers: Domestic manufacturing, infrastructure, capital goods
• Specific preferred areas: Electrical equipment, engineering, power generation, auto ancillaries

In contrast, many underperforming funds maintained higher concentrations in sectors that lagged during the review period. This included significant holdings in large private-sector banks and IT stocks.

New Entrants’ Market Presence

As of June 30, the 14 new AMCs collectively managed total assets worth ₹1.03 lakh crore. This figure represents approximately 1.2% of the total Indian mutual fund industry’s ₹83 lakh crore in assets.

Asset accumulation proved more robust for firms backed by established brands or extensive digital platforms, including Bajaj Finserv Mutual Fund, Jio BlackRock Mutual Fund, and Zerodha Mutual Fund.

Investors considering these newer fund houses are advised to carefully monitor the stability of their performance and the evolution of their investment processes over a complete market cycle.