Executive summary

The performance of actively managed funds has come under the spotlight as an increasing number of these funds have failed to beat market benchmarks in recent years.

Meanwhile, we have seen a sharp surge in assets of passive funds in the country, up nearly five times in the past five years, due to adoption of passive strategy by large institutional investors such as provident fund (PF) trusts.

Is the recent underperformance of actively managed funds a new phenomenon or have we seen it before? What were some of the reasons that affected performance of actively managed funds? Will this recent underperformance of actively managed funds push individuals towards passive funds? What is in it for the distributor community, who are already hard pressed for income due to declining expense ratios for mutual funds in the country?

We try to find answers to such pertinent questions in this white paper, which evaluates the performance of actively managed funds by analysing their long-term historical performance and looks at what lies ahead.

It also incorporates the views and learnings gleaned from industry leaders during two interactive webinars held with the independent financial advisor (IFA) community on May 18 and June 10, and also showcases the results of a survey conducted by CRISIL with IFAs on the topic.