The BSE Sensex scaled 20,000 after 32 months and during the period over 60% of the mutual funds have outperformed their benchmark index. According to the survey conducted by FE, in the last ten years whenever markets are either flat or have seen bull-run, fund managers have beaten the benchmark index in a big way.
The survey suggests that out of 205 equity diversified funds from January 2008 till date, 108 funds have outperformed their benchmark index while 97 funds have underperform in the category. Achal Kumar Gupta, MD of SBI Mutual Fund said, ?Two things matters the most if any fund wants to beat the benchmark, one is the stock picking and another fund manager experience. The main reason for some funds underperforming could be due to missing the sector calls.? In 2002, when equity markets were flat approximately 92% of the equity diversified funds have outperformed the benchmark index which gave returns of over 3%.
During the bear market, we witness reversal of trends as fund managers almost miss the target and usually underperform. During 2000, 2001 or during 2008, equity diversified funds have lagged behind. In 2008, when Sensex gave negative return of 52%, only 3.5% of equity diversified fund outperformed.
Some of the market participants also said whenever markets are flat or volatile, fund managers park money in mid-cap as at that time it usually outperforms large-cap stocks, which helps in beating the index. From January 2008 till date, Birla Sun Life have given highest return of over 15% in the equity diversified category.