Let’s take a look at the share of assets under management (AUM) in the top-rated equity and hybrid funds in the country’s Rs 40-trillion mutual fund industry. You will find that a substantially high share of AUM of two fund houses occupy the top-rated funds – Mirae Asset and ICICI Prudential Mutual Fund.
This also possibly explains why they have progressively grown faster than peers while delivering an optimal balance between risk and return.
Data from mutual fund tracker, Value Research, shows that Mirae Asset and ICICI Prudential Mutual Fund are way ahead of their peers when it comes to share of individual AUM in 4-star and 5-star rated funds.
Simply put, most equity and hybrid schemes of these two fund houses are top-rated 4-star and 5-star funds. This is important because, these are the two categories where most retail investors invest to achieve their long-term financial dreams.
In regular plan category, Mirae Asset and ICICI Prudential MF stand tall occupying 97 per cent and 90 per cent in terms of top-rated fund AUM, respectively.
This clearly indicates that most of their funds have performed better when it comes to assessing their historical performance relative to their peers. Equity and hybrid fund AUM reflects the growth-oriented investments and aspirations of a new, young India.
SBI MF, India’s largest fund house, stands at a distant number three spot with 69 per cent AUM, with UTI MF, the country’s oldest fund house at number four at 67 per cent AUM.
Other major fund houses, such as HDFC MF and ABSL MF are below the 10 per cent mark. On the other end of the spectrum, ICICI Prudential, SBI MF, Kotak MF and Mirae MF are among the big fund-houses with zero share in one- and two-star rated funds.
With investors preferring to go ‘direct’ by buying funds on their own, both Mirae Asset and ICICI Prudential MF are on top with 99 per cent and 84 per cent with 4-star and 5-star funds, respectively.
Kotak MF, Nippon MF, SBI MF, Axis MF and UTI MF have 51-74 per cent direct plan AUM falling in 4-star and 5-star funds.
Typically, ratings are done using different sets of long-term data (say 3-5 years) to gauge the performance of schemes on their risk-return basis. As far as assigning ratings are concerned, 5-10 per cent of funds are assigned 5-star rating. Similarly, next 15-20 per cent are assigned 4-star ratings, and so on. This rating plays a crucial role while picking up funds for investment, as higher rating means consistency in long-term performance. In simple terms, if a fund has a higher rating, this means the fund has fared better on a risk-adjusted basis.
