Mutual Funds failed to beat benchmarks in 2020
Several categories of mutual funds on average failed to beat the returns of their benchmarks in 2020 due to the spread of the virus. However, from 25th March 2020, India has commenced a nationwide lockdown. On the other hand, it looked at returns from 19th February 2020 which was the start of the 2020 COVID correction to 22nd March 2021.
According to the AMFI reports, from March 25th, 2020, to 22nd March 2021, only 3.45% of large-cap schemes beat the benchmark. On the other hand, 24% of Mid-cap schemes and 8.70% of small-cap schemes beat the benchmark. In the multi-cap category, 11.76% of schemes beat their benchmark.
Anyhow, the result will be slightly better if the period considered by 19th February. From 19th February 2020, the large-cap schemes beat 6.90%. Further, 32% of mid-cap and 18.18% of mutual funds beating their benchmarks.
However, the failure to beat came despite a strong performance by various Mutual Fund categories in 2020. AMFI reports shown that on average, large-cap funds delivered 77.76% returns, mid-cap funds generated 96.53%, and small-cap schemes delivered 117.59%.
Anyhow, these returns fell well short of indices. For example, the large-cap schemes underperformed by 14.11%, mid-cap by 10.89%, and small-cap by 16.93%.
The Bombay stock exchange benchmarks, S&P BSE 100 produced 91.87%, S&P BSE Mid-cap returned 107.42% and the small-cap index delivered 133.98% during the same period.
However, the active fund managers said that in a one-year time span, the mutual funds did not beat the benchmark. Because the performance over the medium-term schemes has delivered better success rates relative to the benchmark.
As of the records, the decomposition of markets witnessed in 2018 and 2019. Now, those markets diminished. Moreover, the sharp bounce bank witnessed since March 2020 under the broad-based.
There are several reasons behind the fall. For instance, stocks like Reliance Industries lead the rally the last summer. During that time, mutual funds were barred by regulations from having more than 10 of their assets in a single stock. This is the first reason. The second one remains the actively managed funds have underperformed in bull markets historically. Last but not least, the market concentration of the earlier years gave away in the letter part of 2020 to a more flowing set of stocks rallying.