A NaMo wave and anti-incumbency mood in the country has brought in a perception of change in Government as 2014 elections are underway. The Indian equity markets too have been ascending and of late scaling a new high. The current market rally seems broad based and is not restricted to large caps but has gone down even with mid and small caps. But as an investor in mutual funds, has the current exuberance done good to your portfolio?. Well, it's time that you revisit your portfolio now. PersonalFN is of the view that, whenever markets rally, especially the way they have rallied over past few months; you should prudently review your portfolio. This is because, there's always possibility that some of your funds are not performing. Some funds may have exposed you to a greater risk and have generated inadequate returns. Likewise, it is imperative for you to assess, whether your mutual fund is charging you high, but generating too little. You see, the mutual fund scheme which you hold has to justify its costs. Through this article at PersonalFN we are doing exactly that for you.

What is the cost of your fund?

Expense ratio tells you what the cost of a fund is. Expenses eat into your returns. Suppose a fund has an expense ratio of 2.0% and it generates gross returns of 14.0%; your net returns could be 12%. PersonalFN brings to you a list of 10 funds which have generated poor returns, but have yet charged higher expenses to investors.
 

10 mutual funds: high on costs and low on returns

		Absolute Returns (% )	Compounded Annualised Returns (%)
Scheme Name	AUM (Rs in Cr.)	1-Year	3-Year	Expense Ratio (%)
Baroda Pioneer Growth Fund (G)	208.97	13.9	3.8	3.10
IDFC Imperial Equity Fund (G)	140.32	11.2	4.3	2.95
IDFC Classic Equity Fund (G)	168.35	11.3	6.7	2.85
DSPBR Focus 25 Fund (G)	233.06	13.5	4.5	2.79
Sundaram Growth Fund (G)	176.19	11.2	4.4	2.78
Principal Dividend Yield Fund (G)	102.48	12.1	6.5	2.70
Templeton India Growth Fund (D)	464.24	10.9	4.7	2.69
Sundaram Select Focus (G)	445.86	13.7	5.4	2.64
UTI Contra Fund (G)	122.41	10.0	3.0	2.62
Taurus Star Share Fund (G)	160.04	13.5	6.3	2.58
S&P BSE SENSEX	-	14.3	7.4	-
S&P BSE 200	-	11.9	6.2	-

Data as on May 09, 2014
List is not exhaustive. Funds with higher AUM are considered
(Source: ACE MF, PersonalFN Research)  

PersonalFN analysed equity diversified funds that have completed 3 years. Fund featuring in the above given list are those which have underperformed at least one of the two major indices, S&P BSE Sensex and S&P BSE 200, over 1-Year returns and 3-Year returns parameter. These funds have an expense ratio of more than the average of expense ratios of all equity diversified funds (which is 2.51%) that have completed 3 years.

As you might have observed by now, funds that have failed in justifying their costs belong to some of well-known fund houses that have some best performing funds under their offerings. This suggests that, although a fund might belong to a well-regarded fund house but unless it compensates you adequately it is of little use to you.

PersonalFN is of the view that one should get rid of these funds and consider investing in other diversified funds that have a consistent performance track record. Furthermore, factors such as expense ratio shouldn't be ignored. Equity markets might further rise or fall depending on outcome of Lok Sabha elections. But above mentioned funds might disappoint you under both scenarios. Get rid of them before it gets too late.

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rajivahuja06@gmail.com May 17, 2014 I agree .

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