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Small Funds Race Past Bigger Peers

On the returns front, the smaller funds have managed to beat their much bigger competitors

The ‘bigger the fund, the better it is’ argument may not hold if one looks at the performance and returns of some of the behemoths in the Indian mutual fund galaxy over the time span of the last one year. The habit of investors to put their money in funds that have larger assets, rather than small ones, has not really paid off.

The small funds have outperformed their bigger peers from August 2008 to July 2009. Except for HDFC Equity and HDFC Top 200, which are 5th- and 6th-largest respectively as per their assets in July 2009, none of the popular funds have actually crossed the 20 per cent returns mark. These two funds gave returns of 23.6 per cent and 26.4 per cent respectively.

Surprisingly, Reliance Natural Resources Retail Fund, which is the 3rd-largest, as per July assets, gave returns of just 1.05 per cent, while ICICI Prudential Infrastructure, which is the 7th-largest gave returns of 4.61 per cent.

DSPBR T.I.G.E.R. Regular and Magnum Taxgain, 9th- and 4th-largest as per July assets respectively, too did not match up to the standards and failed to cross the 10 per cent returns mark, giving returns of 9.67 per cent and 9.63 per cent respectively. The top rated fund, Reliance Diversified Power Sector Retail, with its July assets standing at Rs 5,331 crore, could only give returns of 18.37 per cent.

On the contrary, some smaller funds as per their July assets performed brilliantly to nearly touch the 40 per cent returns mark. Shying away from all the expected norms, almost all of these funds surprised by giving returns of more than 30 per cent.

Surprisingly, even if the government has made its intensions clear about disinvestment policy in the Public Sector Undertaking (PSUs) and fund houses are showing interest by launching PSU new fund offers (NFOs), the already existing ones gave good returns over this period of time.

Kotak PSU Bank ETF, and PSU Bank BeES managed to give returns of 38.4 per cent and 37.7 per cent respectively, the former even managing to grab the top position amongst the top 10 funds returns table. The second-best fund during this time was UTI Transportation and Logistics, giving returns of 38.07 per cent.

Taurus Infrastructure, a Rs 26-crore fund, performed well, though remaining at the bottom of the top 10 fund returns table after giving returns of 31.4 per cent.

Smaller Funds with High Returns
Schems  1 Year Return(%)  Aug-08  Jul-09  Ranking
(July Assets)
Kotak PSU Bank ETF 38.40 33.09 43.39 203
UTI Transportation and Logistics 38.07 33.75 34.83 215
PSU Bank BeES 37.65 121.36 21.23 230
Tata Life Sciences & Tech 35.43 36.46 37.25 212
Sundaram BNP Paribas Financial Services Opp. Ret 34.27 145.26 147.71 133
Reliance Banking ETF 33.97 13.80 12.83 242
UTI Banking Sector Reg 33.19 94.97 106.98 154
Reliance Banking Retail 32.40 844.84 931.33 44
Birla Sun Life Dividend Yield Plus 31.75 233.16 253.89 109
Taurus Infrastructure 31.38 15.80 26.13 223
Performance of Top 10 Funds (By Assets)
Reliance Diversified Power Sector Ret 18.37 5117.64 5331.94 1
Reliance Growth 10.72 4900.00 5269.41 2
Reliance Natural Resources Retail 1.05 4867.19 4436.37 3
Magnum Taxgain 9.63 3248.26 4177.34 4
HDFC Equity 23.67 3732.29 4002.64 5
HDFC Top 200 26.40 2385.73 4002.10 6
ICICI Prudential Infrastructure 4.61 4014.57 3953.18 7
Reliance Vision 15.72 3385.05 3476.99 8
DSPBR T.I.G.E.R. Reg 9.67 3580.67 3337.86 9
Magnum Contra 17.63 2257.09 2732.91 10
Returns as on 31st July 2009