Union Small Cap Fund – Direct Plan 


Overall analysis 

3-yr rolling excess returns has given low returns in the last 1 year and TE ranges above 6% indicates active fund. The funds’ performance in the short run has been deteriorating. The fund had given the low excess return in comparison to its peers; but has dropped to below the first quartile over the past 1 year.

Performance analysis 

Rolling returns in quartiles

The rolling return chart shows excess 3-year annualised returns 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.

The rolling excess return chart shows that the blue line is below the third green median line, the fund was 1.31% in May, 2023 and median was around 2.95%, which indicates that the fund is not performing better than median.

Rolling risk/return (Snail-trail) 

The rolling risk/return chart shows excess 3-year annualised returns relative to the index. The top left quadrant would indicate higher returns with lower volatility than index.

This fund has shown impressive 3-year excess returns, touching 10% per annum and a significant time around the 4-6% pa, whilst higher than index volatility of 2-3% pa. However, the excess return came down to around 2% towards the end of June,2023.

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 2-4% range considered to be barely active, 4-6% range considered to be reasonably active and anything higher attributed to concentrated/focused funds. Funds with TE of less than 2% can be considered to be closet indexers.

The Tracking error chart shows that the fund range is more than 8%, which means it is a concentrated fund, on chart the range is between 4-6%, which means it is an active fund.

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 information ratio chart shows that fund IR is -0.47, and maximum time it is below 1 which indicates that the fund is not ideal.

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 stock style chart shows that the fund is typically a Mid cap growth fund.

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.

The factor profile chart shows that the fund yield compared to the 5 year historical range is low, momentum compared to the 5 years historical range is very high and quality of the fund is high, volatility is moderate, liquidity is low.

Prepared by – Dhruvi Shah, August 2023


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