How active and skilled are Indian equity funds?
22 June, 2022
While retail investors and advisers track various performance-based quantitative parameters such as excess returns and Sharpe ratio on mutual fund fact sheets, the professional investment consulting industry uses more advanced measures such as tracking error and information ratio to evaluate active funds. We calculated and analysed these measures for the Indian equity fund universe with
- Published in Equities, Featured, Portfolio Construction
Do mutual fund ratings work?
16 February, 2022
Investors and advisers often use ‘star ratings’ to select the ‘best mutual funds’. They assume that the mutual fund ratings, whether denoted by stars or numbers (1 to 5) or alphabets (A, B etc) or metals (gold, silver etc), would be helpful in their selection of funds that will outperform in the future. We have
- Published in Advisory Process, Featured, Portfolio Construction
Morningstar
28 July, 2020
About Founded in 1984, Morningstar has grown from a startup to a global research company in 35 years. A 27-year old stock analyst , Joe Mansueto thought it was unfair that people didn’t have access to the same information as financial information as financial professionals. So he hired a few people and set up shop
- Published in Dossiers on Rating Agencies
Can better fund research fix capitalism?
21 October, 2017
“We have met the enemy and he is us.” — Walt Kelly We blame capitalism for most of our modern ills, from climate change to iPhones that die every two years. Yet we rarely bother to read the sales pitch our accountant, banker, or adviser gives us for the mutual funds to invest our hard-earned
- Published in Portfolio Construction
The value of dumb questions
24 April, 2017
Being an outsider, as I have been for most of my life, brings with it a feeling of inadequacy. To hide this feeling, I did what many others do – I would preface questions with ‘Hey, I am new here….may I ask a dumb question?’ Today, I care less about what people think of me,
- Published in 3_Communication
Classifying funds
24 April, 2016
Investment decisions rely on performance of funds universe including that of the median and various quartiles. Hence, the universe category definitions and classifications are very important. Unfortunately, AMCs have multiple funds in the same category with significant dispersion in returns. To make it worse, leading rating houses have different classification methodologies resulting in different classifications.
- Published in Portfolio Construction
Funds research…deconstructed
18 February, 2016
I love watching cooking shows. It doesn’t matter that I don’t cook. I watch for enjoyment sake, and perhaps for the comfort of knowing that in a cooking emergency, I will be able to put something together. One concept that I always get fascinated by is that of ‘deconstructed’. Chefs separate or deconstruct the ingredients
- Published in Portfolio Construction
Why good mutual fund research is hard to find
12 January, 2016
There are many brilliant books on stock picking, from simple beginners’ guides to classic textbooks like Ben Graham’s Security Analysis and The Intelligent Investor. I could find only one credible book on mutual funds: John Bogle’s Common Sense on Mutual Funds. Bogle’s advice? Investors should put their money in index funds. A number of finance luminaries — Warren Buffett,
- Published in Portfolio Construction
Why you shouldn’t invest in 5-star rated mutual funds
18 December, 2015
Ask any investor how they select mutual funds (MF) – the most common answer tends to be on the basis of star ratings. Such is the allure of stars that it doesn’t appear to matter whose stars. I know so, because I spent my career in fund research. And no matter how different my firm’s
- Published in Portfolio Construction
Role of financial ratings
30 October, 2015
When people hear the leader of a country comment on how a credit rating agency should rate its debt, they realise credit ratings are important. When they read about the role of credit ratings in the global financial crisis, they get angry about the finance industry being responsible for their misery, but figure they must
- Published in Portfolio Construction
Making sense of too many products
03 October, 2015
Like in many other markets, the mutual fund industry the world over seems to have a dazzling choice of products, but with the top few dominating assets under management and inflows. In the US, there are more funds than stocks. Even in a nascent market like India, there are more than 1,000 choices, and that’s
- Published in Portfolio Construction
Fund managers need the right temperament
09 June, 2015
What kind of people make good fund managers? While everyone should be interested in this question, there is surprisingly little research on this topic. Dr Jack Gray talks to Hansi Mehrotra about his efforts and findings. While the general perception may be that investments is about numbers, investment professionals everywhere agree that money management is
- Published in Business Issues, Portfolio Construction
Forget track records for responsible investing
09 December, 2009
The United Nations Principles for Responsible Investment now claims over 550 signatories with more than USD 18 trillion in assets. UNPRI provides a framework for institutional investors to integrate environmental, social and governance (ESG) factors into investment processes. Also, the International Finance Corporation has sponsored a study on the prevalence of RI in emerging markets.
- Published in Equities