Investors have often been sold equity schemes, based on their ability to invest for the long-term. We are living in an environment that is fast evolving, with the long-term highly uncertain. Over the last few years, money has been pouring into equity mutual funds, except in June, when the net inflows were rather poor.
However, the returns from equity mutual funds has not been too great even over the longer term. Though the markets fell after the Covid-19 crisis, they have recovered almost 40 per cent from lows and yet investors have seen ordinary returns even in the long term. Take a look at the performance of some of the largecap equity funds. We have taken the anualized returns of largecap funds, which have assets under management of more than Rs 10,000 crores.
Annualized returns of large cap fund with AUM in excess of Rs 10,000 crores
|Name of the fund||1-year returns||3-year returns||5-year returns|
|ICICI Prudential Bluechip Fund||-7.78%||1.57%||5.61%|
|SBI Bluechip Fund||-8.61%||0.03%||4.41%|
|Aditya Bilrla Sunlife Frontline Equity||-9.68%||-1.05%||3.965|
|HDFC Top 100||-18.17%||-1.89%||3.52%|
|Mirae Asset Largecap Fund||-6.49%||2.88%||7.53%|
|Axis Bluechip Fund||0.17%||8.35%||8.26%|
Even if we see the annualized returns of some of these funds for 10-years, you realize that most have given a returns around 8 to 10 percent, which would have been less than the amount earned on bank deposits 10-years ago, considering banks compound interest every quarter and the yields could rise dramatically over 10 years.
Fund flows into equity mutual fund declining
Fund flows into equity mutual funds have shown a declining trend in both May and June. This may have largely to do with forced redemptions as also better returns in June. SIPs in June also saw a declining trend as joblessness and a lockdown may have forced discontinuation of the same.
For the next few months until economy recovery takes place, we might see inflows into mutual funds showing the same declining trend.
Will investors lose patience?
Returns from equity mutual funds are currently very poor and from a 1 and 2 year perspective, they are at best disastrous. If returns continue to be the same for the next few months, we might see investors lose patience. However, the problem right now for investors is that there are very few investment choices. Gold prices have already rallied and interest rates on fixed deposits are low. With there being no other alternative, investors may do well to stick to mutual funds.
About the author:
Sunil Fernandes has spent 25 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning.