Crisil ratings: a good criterion for MF investors
14 Nov 2011
Crisil, an independent analytical and ratings company, provides a quarterly ranking of the relative performance of various mutual fund schemes across different categories. Only open-ended funds are considered for ranking; and further they have to have
a) A minimum two-year NAV (net asset value) history (one year for liquid, ultra short-term debt, short-term debt and index funds),
b) AUM above a certain specified limit (eg Rs50 crore for equity and liquid funds, Rs25 crore for ELSS, income, gilt, ultra short-term debt and MIP funds, Rs15 crore for balanced funds, Rs10 crore for index funds),
c) Complete portfolio disclosure
The parameters which determine the ranking include the following:
Superior return score: This is the measure of the relative return and risk of a particular fund vis-à-vis the peer group.
Mean return and volatility: Mean return is the average daily return. Volatility is the standard deviation of these returns; the higher the standard deviation the more volatile the fund.
Portfolio concentration analysis: Both industry and company concentration is measured to ascertain whether the fund is adequately diversified. Higher concentration increases the fund risk.
Liquidity analysis: This determines the ease with which the fund can be liquidated. This is important in case there is sudden redemption pressure on the fund.
Asset quality: This is particularly important in case of debt funds and measures the probability of default by the issuer of the debt.
Modified and average maturity: This parameter too is relevant for debt funds and shows how susceptible the fund is to interest rate movements; the longer the maturity, the more the fund volatility due to changes in interest rates.
Downside risk probability (DRP): This measures the probability of earning lower returns than the short-term risk free investment (such as a 91-day T-bill).
Asset size: Considered for ultra short-term debt and liquid funds, it determines the impact of large inflows/outflows on the fund performance and the ability to manage these large flows. The higher the asset size, the better it is.
Tracking error: This is used for index funds to measure how closely they are able to track the underlying index. The lower the error, the better it is.
The ranking - for any given category - is from 1 to 5; 1 denoting 'very good' (top 10 percentile) performance and 5 'relatively weak' (bottom 10 percentile) performance.
Based on the foregoing, the top three funds for the quarter ended June 2011 amongst the various categories are given below:
| Jun 11 Rank | Mar 11 Rank | Superior Return Score | Industry Concentration | Company Concentration | Liquidity | |
| Weightages | | | 75% | 10% | 5% | 10% |
| Large Cap Equity Funds (> 75% in top 100 stocks) | ||||||
| Fidelity Equity Fund | 1 | 1 | 1(1) | 2(3) | 1(1) | 4(4) |
| Fidelity India Growth Fund | 1 | 1 | 1(1) | 4(5) | 2(2) | 5(4) |
| HDFC Top 200 Fund | 1 | 1 | 1(1) | 4(4) | 2(2) | 3(3) |
| | ||||||
| Diversified Equity Schemes | ||||||
| HDFC Equity Fund | 1 | 1 | 1(1) | 3(3) | 3(3) | 3(3) |
| ING Dividend Yield Fund | 1 | 1 | 1(1) | 4(4) | 3(3) | 3(3) |
| Mirae Asset India Opp. Fund | 1 | 1 | 1(1) | 2(3) | 2(2) | 2(3) |
| | ||||||
| Small and Mid Equity Schemes (< 45% in top 100 stocks) | ||||||
| Birla Sunlife MNC Fund | 1 | 2 | 1(2) | 5(5) | 5(5) | 4(5) |
| HDFC Mid-cap Opp. Fund | 1 | 1 | 1(1) | 4(4) | 2(3) | 3(4) |
| Religare Mid-cap Fund | 1 | n.a. | 1 | 3 | 2 | 3 |
| Infrastructure Equity Schemes | ||||||
| Birla Sunlife Basic Ind. Fund | 1 | 1 | 1(1) | 2(1) | 1(1) | 3(3) |
| DSPBR Nat. Res & New Energy | 1 | 2 | 1(2) | 5(5) | 3(3) | 2(3) |
| AIG Infra. and Eco. Reform | 2 | 2 | 2(2) | 1(2) | 3(4) | 2(2) |
| ELSS Schemes | 80% | 10% | 5% | 5% | ||
| Fidelity Tax Advantage Fund | 1 | 1 | 1(1) | 3(3) | 2(2) | 4(3) |
| HDFC Tax Saver Fund | 1 | 1 | 1(1) | 1(1) | 2(2) | 4(5) |
| ICICI Prudential Tax Plan | 1 | 1 | 1(1) | 2(2) | 3(2) | 5(5) |
| | ||||||
| Index Schemes | ||||||
| Kotak Sensex ETF | 1 | 2 | | | | |
| Nifty BeEs | 1 | 1 | | | | |
| Franklin India Index Fund - BSE Sensex Plan | 2 | 3 | | | | |