Funds that escaped with least amount of damage

The quarter ended September ’08 has been a nightmare for the domestic mutual fund (MF) industry. The carnage following the collapse of global financial markets has not spared India. Indices have tumbled like a pack of cards and with equity valuations across sectors reaching their nadir, equity-based MFs can do little, but helplessly watch their net asset values (NAVs) evaporate into thin air.

And when all equity schemes end up posting ‘double-digit’ negative returns, it becomes challenging to separate the wheat from the chaff.

Out of a total of 222 schemes analysed for their performance in the ET Quarterly MF Tracker for the three-month period ended September ’08, nearly 70% are either purely equity or equity-based schemes. (For the complete rankings, log on to

But such has been the wrath of the market that not a single scheme has managed to post positive returns for the one-year period. So does that mean we have no leaders, and thus, no laggards this quarter?

Well, among the blind, the one-eyed man is king. So, the platinum and gold funds that find a place in this edition of the Quarterly MF Tracker are the ones that have performed relatively better than their peers.

While these funds have also seen an erosion in their respective values and are bleeding like other funds within their category, what distinguishes them from the rest is the degree of the erosion in their values. If a 40% return is higher than 15% in a bull run, then a -15% return is also much better placed than -40% in a falling market. And that’s how we have found the hidden gems in this quarter.

While there has not been much reshuffling in the category of equity-linked savings schemes (ELSS), equity diversified schemes have thrown up some surprises.

DSP Merrill Lynch’s Top 100 Equity has topped the list in this category, replacing DSP Merrill Lynch Equity Fund. SBI Magnum Contra, which had retained its position among the top three in this category, for over two years now, has finally moved down a few notches.

While it continues to hold its platinum grade, and, in fact, is the only fund from the SBI Magnum basket to be ranked platinum, many schemes now seem to be overtaking its might aggressively.

The schemes which have made it to the platinum grade of the equity diversified category — for the very first time — include HDFC Growth, HDFC Top 200 and DWS Alpha Equity.

Another scheme from Deutsche Asset Management — DWS Investment Opportunity — has also put up a spectacular show and has improved its platinum position from the fourth to the second in the September quarter.

This fund had been really quick to climb up the ladder to gold from silver. It then made it to platinum grade in the previous quarter and is now improving its performance within the platinum set. The crown for the best fund house, however, is retained by DSP Merrill Lynch for the second quarter in a row.

Compared to three platinum medallions in the previous quarter, it has not only won four of them this quarter, but is also way ahead of other fund houses in the list.

HDFC Asset Management ranks second with two platinum and three gold medallions, followed by Kotak Mahindra Asset Management, which has won two platinums and two gold medals.

The current edition also includes a number of new entrants which have completed three years of existence. While Magnum Comma, Birla Sun Life India GenNext, IDFC Classic Equity, Sahara Wealth Plus, UTI Opportunities and Kotak Contra have bagged a silver each for their average performances, Reliance Tax Saver and Tata Midcap have had to be content with bronze. Principal Junior Cap, Fortis (earlier ABN Amro) Dividend Yield and JM Emerging Leader, however, have been rated as ‘lead’ for the quarter.

While the Quarterly MF Tracker does not rank sectoral funds or exchange-traded funds (ETFs), it is heartening to see gold ETFs emerging as a distinguished asset class.

With gold prices hitting the roof in a weakening equity environment, ETFs have given over 50% annual returns. This definitely drives home the importance of diversification in investment planning.

Source : Economic Times (03-11-08)

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