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Decreasing relevance of large-cap funds

Dhirendra Kumar delves into why actively managed large-cap funds are losing their charm.

Have large-cap funds lost relevance because of low alpha?
- Rajan Bhat

Yes, it looks like active large-cap funds are losing their relevance. Firstly, this is because the large-cap universe is very narrow. Secondly, active large-cap funds have lost their plot in terms of the cost advantage to passive funds. These funds have to return about 2 per cent more than the index to be at par with index funds or ETFs, owing to the higher management fee.

However, for the multi-cap space, the number of passive funds are low and hence, active funds are still a worthy choice.