The one large-cap fund that beat its benchmark 87% of time

Summary: How many funds can say they’ve beaten their benchmark nearly nine times out of ten over the past five years? We crunched a decade’s worth of numbers on India’s top large-cap funds, looking beyond headline returns to see who delivers most of the time. What we found might surprise you. While Nippon India and ICICI Prudential’s funds have done exceptionally well, there’s another large-cap fund that has won the consistency sweepstakes.

Large-cap funds are often the core of an investor’s equity portfolio. They invest in the country’s biggest, most stable companies. Think of market leaders with strong balance sheets and proven track records, such as Reliance and HDFC Bank. While they won’t usually shoot the lights out in a bull run like small- or mid-caps might, they can deliver solid, steady returns over time.

But steady doesn’t mean equal. Even within the large-cap category, some funds have been far more consistent than others.

Let’s start with the five best-performing large-cap funds of the past 10 years, based on simple point-to-point returns:

Point-to-point vs rolling returns

The above figures are point-to-point returns. They measure the growth of your investment if you had invested on a specific date 10 years ago and stayed invested until now.

While that’s useful, there’s a catch. Point-to-point returns are highly dependent on the start and end dates. For example, if your starting date was right after a market crash, your return will look unusually high. If it were just before a crash, it would look unusually low.

That’s why we prefer rolling returns to judge a fund’s performance. Rolling returns take every possible start date and holding period within the data and calculate the return for each. This gives a much clearer picture of how a fund performs most of the time, not just between two chosen dates.

How often did they beat their benchmark?

One way to judge consistency is to see how often a fund outperformed its benchmark index over rolling five-year periods in the past five years.

What does this mean in plain English?

Take Canara Robeco Large Cap Fund. Over the past five years, if you looked at every possible five-year period, the fund outperformed its benchmark in 1,071 out of 1,235 cases. That’s about 87 per cent of the time.

That’s an impressive track record. It also reveals something interesting: although Canara Robeco Large Cap was only the third-best performer in simple point-to-point 10-year returns, its rolling return record shows it has been more consistent at beating the benchmark than any other fund in this list. Even more so than Nippon India Large Cap, which had the highest point-to-point return.

This highlights why rolling returns give you a better idea of a fund’s day-to-day reliability, while point-to-point returns can hide these nuances.

The return bucket view

Another way to see consistency is to look at the distribution, how often the fund delivered negative returns, single-digit returns, double-digit returns, etc.

And here’s what we learnt:

• Negative five-year returns were rare — only 2.8 per cent to 3.4 per cent of the time — underscoring the resilience of large caps over longer holding periods.
• The real differentiator came out in how often each fund produced double-digit returns (above 10 per cent returns).
• Invesco India Large Cap delivered above 10 per cent returns the maximum number of times.
• Canara Robeco Largecap was very close behind.

Basically, these two funds consistently crossed the 10 per cent barrier more often than Nippon India, Mirae Asset and ICICI Pru.

What about volatility?

Performance is only half the story. If you also want to know how bumpy the ride was, you need to check a fund’s standard deviation.

Think of it like this: if two buses take you from point A to point B at the same time, but one takes a smooth highway and the other goes over potholes and speed breakers, you’ll feel a lot better on the first bus. Standard deviation measures those bumps in the journey. The higher it is, the more volatile the fund’s returns have been.

Here, ICICI Prudential’s large-cap fund comes out on top. That said, all five are in a similar range, meaning no single fund here is dramatically riskier than the others based on past volatility.

The last word

While Nippon India’s large-cap fund has been a top-performer in the point-to-point chart, if you’re looking for consistency — high outperformance frequency, relatively fewer negative years and steady volatility — Canara Robeco Large Cap Fund stands out in this group.

But, is Canara Robeco’s large-cap fund recommended by us?

We suggest you check out what our seasoned analysts make of the fund at Value Research Fund Advisor. In fact, you can check if any of the five funds mentioned in this piece find their place on our recommendation list.

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Also read: Top mid-cap fund in the last 10 years? Bet you missed it