Myth of Equity Mutual Fund Performance

Abstract

Mutual Fund Investment: is it a panacea or a peril? The fascination about mutual fund investment has attracted many investors since its inception due to its perfect arbitration between risk and return. Till December 2013, the total investment in mutual fund industry stood at ₹8,765,220 million and is growing at a rate of around 11 per cent every year. Whether these investment made into mutual fund are giving better return or are the fund managers efficient? This article has made an effort to understand and analyze the risk and return performance, stock selection ability and market timing ability of the fund managers for the period January 2008 to December 2013. Five Indian asset management companies were selected and their equity fund’s performance were tested by applying certain statistical measures like beta, Treynor ratio, Jensen’s alpha, Henriksson–Merton model. From a sample size of 41 equity funds, we found very few funds with superior return while average stock selection ability and almost no market timing ability found.