61% equity mutual fund schemes failed to beat benchmarks in five years

Around 61% equity mutual fund schemes failed to beat their respective benchmarks in the five-year horizon. Around 62% schemes underperformed their benchmarks in the seven-year horizon. ETMutualFunds considered the performance (CAGR) of 156 schemes in the five-year horizon, and 147 schemes in the seven-year period and compared their performance with relevant current benchmarks. We considered only regular, growth schemes for the study. We also looked at the rolling returns for five and seven-year periods and compared them with their current benchmarks.

How equity schemes performed?
Five Years Seven Years
Total equity schemes 156 147
Number of schemes underperformed 95 91
% of schemes that underperformed 61% 62%

Source: ACE MF

Only three equity mutual fund categories – contra, multi cap, and small cap – managed to beat their benchmarks convincingly in the five year period. The rest of the categories fared badly. The same categories – contra, multi cap, and small cap – also did well in the seven-year horizon.

The large cap category was the worst hit in the five-year horizon. Out of 24 schemes, 22 schemes failed to beat their benchmarks. That is a whopping 92% underperformance. Around 84% of the large & mid cap schemes also failed to beat their benchmarks. Most equity-linked saving schemes (ELSS) also underperformed their benchmarks. Out of 26 schemes, 19 ELSS schemes underperformed their benchmarks. Out of 19 flexi cap schemes, 12 failed to beat their benchmarks.

Flexi cap funds 19 12 63%
Value funds 10 6 60%
Mid cap funds 20 11 55%
Focused funds 14 7 50%
Small cap funds 15 2 13%
Multi cap funds 7 0 0%
Contra funds 2 0 0%

Source: ACE MF

Large cap category was the worst hit even in the seven-year horizon. Around 21 out of the 23 schemes, underperformed their benchmarks. Around 15 large & mid cap schemes also failed to beat their benchmarks. Around 14 out of 19 mid cap schemes failed to match their benchmark returns. Around 8 focused schemes also failed to beat their benchmarks.

Most flexi cap schemes also failed to beat their benchmark in a seven-year horizon. Out of 19 schemes, 13 schemes have failed to beat their benchmarks. Around 22 ELSS schemes out of which 14 schemes also failed to beat their benchmarks.

Performance in seven years
Category Total Schemes Schemes underperformed % of underperformance
Large Cap Fund 23 21 91%
Large & Mid Cap 18 15 83%
Mid Cap Fund 19 14 74%
Flexi Cap Fund 19 13 68%
ELSS 22 14 64%
Focused Fund 14 8 57%
Value Fund 10 4 40%
Small cap Fund 14 2 14%
Multi Cap Fund 6 0 0%
Contra 2 0 0%

Source: ACE MF

Most large cap, large & mid cap, mid cap schemes, equity-linked saving schemes, and flexi cap schemes failed to beat their respective benchmarks in both five and seven-year horizons.

Apart from the trailing returns, we also analyzed the performance of these schemes based on the rolling returns delivered by them in five and seven-year horizons. We then compared them with rolling benchmark returns for the same period.

Around 46% equity schemes failed to beat their respective benchmarks in the five-year and about 24% in seven-year horizons.

Rolling returns – underperformance of equity schemes
Five Years Seven Years
Number of equity schemes 156 147
Schemes underperformed 72 36
% of underperformance 46% 24%

Mid cap category was the worst hit in the five-year period. Around 12 out of 20 mid cap schemes failed to beat the benchmark. Around 14 large cap schemes failed to beat the benchmark. About 8 focused schemes failed to beat the benchmark. Out of 26 ELSS schemes, 14 schemes have failed to beat their benchmark.

Category–wise performance in five years (rolling returns)
Category No. of schemes No. of schemes Underperformed % of underperformance
Mid Cap Fund 20 12 60%
Large Cap Fund 24 14 58%
Focused Fund 14 8 57%
ELSS 26 14 54%
Flexi Cap Fund 19 10 53%
Large & Mid Cap 19 9 47%
Small cap Fund 15 3 20%
Value Fund 10 2 20%
Multi Cap Fund 7 0 0%
Contra Fund 2 0 0%

Source: ACE MF

Multi cap schemes, small cap schemes, value funds and contra funds outperformed their respective benchmarks.

In the seven-year horizon, large & mid cap category was the worst hit. Around 10 schemes, out of 18 schemes have failed to beat their benchmark. Out of 23 large cap schemes, 10 schemes have underperformed.

Category–wise performance of equity schemes in seven-year horizon (rolling returns)
Category No. of schemes No. of schemes Underperformed % of underperformance
Large & Mid Cap 18 10 56%
Large Cap Fund 23 10 43%
Focused Fund 14 5 36%
Flexi Cap Fund 19 5 26%
Mid Cap Fund 19 4 21%
Small cap Fund 14 1 7%
ELSS 22 1 5%
Value Fund 10 0 0%
Multi Cap Fund 6 0 0%
Contra 2 0 0%

Source: ACE MF

Most of the categories have been able to beat their benchmark in the seven-year horizon.

We considered – large cap, large & mid-cap, mid cap, small cap, multi cap, flexi cap, focused, contra, value-oriented, and ELSS categories for the study. The five-year and seven-year rolling and trailing performance of the schemes is compared to their respective current benchmark performances during the same horizons.

Note, this is not a recommendation. This is just an exercise to see how these schemes fared vis-a-vis their benchmarks. We have considered their current benchmarks for the study. For recommendations, please read our best recommended schemes in 2022.