INF174V01341
Overall analysis
3-years rolling excess returns of the fund was good in the past, but in recent phases its returns have fallen somewhere between median and lower quartile. Overall, this fund has moderate TE (moderately active). IR is low which is not ideal and the fund Is not providing risk-adjusted return. This fund had started taking positive risk to generate returns which were not similar in its past stages.
Performance analysis
Rolling returns – 3 years rolling excess returns over 5 years.
Snail trail – 3 years rolling excess risk/return over 5 years.
Tracking error – 1 year rolling tracking error.
Information ratio – 1 year rolling information ratio.
Rolling returns in quartiles
The rolling return chart shows excess 1Y-year rolling return in context of peer return quartiles. The blue line’s time above the third green median line indicates the fund’s better than median performance.
3 years rolling excess returns are average as can be seen in the above chart; blue line which is the indicator of the fund started with the excess returns over its benchmark and peer around 4-5%. This fund had the highest excess returns of 8.24% in October 2021, further the returns slumped down crossing down the upper quartile line. In June 2023 the fund’s 3 year rolling excess returns stood at 1.90% against its peers. This particular fund had never lacked its returns against benchmark.
Rolling risk/return (Snail-trail)
The rolling risk/return chart shows excess 1-year annualized returns relative to the index. The top left quadrant would indicate higher returns with lower volatility than index.
Snail trail Indicator has its most of its track inside the top left corner (Taking least negative risk and generating +ve returns) from start point & now it is slowly entering the top right quadrant (taking +ve risk and generating +ve returns), had the highest risk of 8.2% by taking the risk of -1.4%, (E) Ending point In top right quadrant states that ; as of June 2023 the fund generated the 3 years rolling returns of 1.90% with the risk of 0.2%.
Tracking error
The tracking error chart shows how the fund ‘tracks’ against the index. The higher the TE, the more active the fund’s return has been, with the 1-3% range considered to be low TE, 3-6% range considered to be moderately active and anything higher than 6% is high TE. Funds with TE of less than 2% can be considered to be closet indexers.
1 year rolling tracking error is in the range bound of 3% to 7%, concluding that this fund is moderately active, and had the highest tracking error of 6.9% in November 2020. Currently it stood at 4.44%- as of June 2023.
Information ratio
The information ratio is a measure of ‘risk-adjusted return’ as it’s the excess return per unit of excess volatility. Active funds should have IR of higher than 1, ideally higher than 1.3 at least to indicate skill.
The 1 year rolling information ratio of this fund had been positive most of the time and negative very rarely. IR was in negative phase from March 2021 to May 2021, then after the IR raised till 3.6 which was the high level of this fund. Currently it stands at 0.5; which means the fund is less active.
Portfolio analysis
Stock style chart
Morningstar’s stock style chart shows the ‘style’ of the stocks in the portfolio in terms of size and value/growth style. The centroid shows the weighted average while the zone circle shows how varied the stock styles are.
The centroid indicator of this fund lies at the top right corner of the stock style chart box- which indicates that; the portfolio of this fund has weightage over large cap stocks growth category while its peers also has similar securities considered. Ownership zone indicator ring says that; the fund has picks around all the caps (small, mid & large) with all the 3 categories (value, blended & Growth) stocks, but has less involvement in small cap & value oriented securities in comparison with mid & large cap stocks. While other multi-cap funds indicated by the yellow (ring)- indicates that its category has channelised its funds only into mid, large- growth & blended types of stocks.
Factor profile chart
Morningstar’s factor profile shows the historical style analysis of the stocks in the portfolio in terms of size, value/growth style and other key factors. The blue circle shows the fund relative to the black dot for the category average.
Morningstar’s factor profile chart concludes that yield/returns is as low as its category average & has declined- as shown by 5yr historical range indicator, while volatility & liquidity is low & according to the 5 years historical range it has been decreased till date. Momentum of the securities held & traded is quite good & high- similar to its category average. Overall quality of the stock picks is good as compared to its peers. Therefore the portfolio stocks are interchanging to growth stocks throughout the 5 years historical range. Size indicator states; it is small & low as compared to its category.
Prepared by – Hemanth Reddy, August 2023
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