Smallcap and midcap mutual fund categories were the only positive performers among pure equity mutual funds in the September quarter.
The category (represented by Crisil– Amfi Small & Midcap Fund Performance Index) managed to stay positive (up 0.64 per cent), while all other categories and benchmarks ended lower.
As a whole, the small and midcap segment - represented by CNX Midcap index fell lower compared with other benchmark indices. Further, over the ranking history period (three years), the category gave 26 per cent annualised returns, over 6 per cent more than the nearest equity mutual fund category viz., ELSS (represented by Crisil– Amfi ELSS Mutual Fund Performance Index).
The category also outperformed all other equity categories across all periods analysed.
Stock selection played a decisive role in helping the small and midcap fund category outperform others. A portfolio analysis showed stocks covering 25 per cent of assets (27 stocks) gave an average 169 per cent absolute returns over the three-year period ended September, compared with 44 per cent returns for similarly portioned assets (five stocks) of largecap funds.
The outperformance of smallcap and midcap funds also came with lesser volatility at 13.92 per cent (measured by standard deviation), compared with 15.37 per cent for largecap funds (represented by Crisil–Amfi LargeCap Fund Performance Index) over the last three years, ending September.
Unlike most other ranking models, which are based purely on returns or net asset value (NAV), Crisil Mutual Fund Ranking uses a combination of NAV and portfolio-based attributes.
This provides a single-point analysis of mutual funds, taking into consideration key parameters such as risk-adjusted returns, asset concentration, liquidity, asset quality and exposure to sensitive sectors.
The rankings also include categories that assign specific focus on consistent performance in the long run. The ranks are assigned on a scale of 1 to 5, with CRISIL Fund Rank 1 indicating ‘very good performance’. In any peer group, the top 10 percentile of funds are ranked CRISIL Fund Rank 1 and the next 20 percentile, CRISIL Fund Rank 2.