Performance Evaluation of Equity Mutual Fund Schemes: a Comparative Study of Amcs In India |

ABSTRACT:

With a wide variety ofinvestment alternatives available to a regular investor today, the riskadjusted evaluation of these alternatives assumes prime importance. One of themost common vehicle for collective investments is a Mutual Fund. With growingnumber of Asset Management Companies (AMCs) and their respective schemes andexpanding Assets Under Management (AUM) in an emerging economy like India, anevaluation of returns generated by mutual funds on a risk adjusted basiscontinues to be of vital interest to investors who need to make informeddecisions and to mutual fund managers whose compensation is tied to fundperformance. This article does a performance evaluation of 20 equity mutualfund schemes spread uniformly across four top AMCs of India for a 10 yearperiod. The study uses five prominent risk adjusted measures namely Sharpe’sratio, Jensen’s Alpha, Treynor’s Ratio, Information Ratio and M² ratio. Thesemeasures differ in how they define and measure risk and, consequently, in howthey define risk-adjusted performance. The article also analyses differences inrisk adjusted returns across AMCs for the selected performance evaluationmeasures. We find that ICICI Pru FMCG Reg (G)offers highest risk adjusted return as it features at the top position for fourout of five measures.  We conclude that HDFC AssetManagement Company offers the best performing schemes two of its appear 4 times each in the top five positions for all performancemeasures put together. Finally, we also observe that average annual riskadjusted return offered by schemes of UTI Asset Management Company is thelowest as it offers the lowest risk adjusted returns according to M2 ratioas compared to all other AMCs. For Treynor ratio also, UTI Asset ManagementCompany has significantly lower risk adjusted returns than ICICI PrudentialAsset Management Company.