“The hardest decision in life is not between good and bad or right and wrong, but between two goods or two rights.” – Joe Andrew
The quote above sums up the difficulty to chose one fund among the two mentioned, there are people who are loyal to one fund vs other and there are people who are fed up with one fund vs other. It all depends on the experience of the person, when he invested in and what was his expectations. Though one thing we can not deny that both these funds are leader in the Large cap fund category with AUM of >20,000Cr under their belt. There is no doubt that both of these funds belong to the leading AMCs and with history of >10 years there is ample data to analyse their behavior so far. for the sake of fairness and avoid the biases to pick a fund. I am going to analyse these funds by name Fund A & Fund B.
Rolling 3 yr returns history:
If you are investing in equity bare minimum time horizon you should have is 3 years so it is a good starting point to look at their 3 yr rolling return history. As one of the fund was launched in May 2008 so i have used the data since May 2008 to Sep 2019 for comparisons. There were roughly 2000+ 3yr rolling return observations.
You will notice that if i was planning to invest in 2011-2013 period, I would have picked the fund A based on rolling return basis. Though between 2014-2017 the fund B had a better rolling return then Fund A so i would have picked Fund B or thought of jumping from Fund A to Fund B. Unfortunately since mid 2017, Fund A has again out performed the Fund B. Now if i want to keep jumping every few years, I might end up being with an under-performer and if i want to stick with one of the fund history will tell me to stick with Fund A as it has outperformed for the most part of historical data. Confused??
Return Distribution & Volatility/ Risk:
Below table gives you a summary to compare between these funds, while looking at their rolling returns across various period and taking the average. Fund A has a better mean return value vs Fund B but the difference has been decreasing as you look at the longer time horizons so on a 5 yr rolling return basis the Fund A has an out-performance of just 0.1% over Fund B. If i am currently invested in Fund B for this 0.1% should i jump to Fund A?
Even the volatility of the funds have been similar and not widely different from each other though Fund A has had a lower volatility across the various periods than Fund B. Though the max returns over a year from Fund B has been whopping 116% vs the 112% of Fund A. Isn’t More risk is equal to more reward?
Upside Capture, Downside Capture & Max Draw-downs
I have obviously harped a lot over last few months/ years on these parameters so it wont make sense to not share the details around the same with you. Over the last 10+ yrs history:
- The Upside capture of Fund A has been 95.2 vs 97.6 for Fund B, which simply means that in an up cycle or a bull run the Fund B has outperformed the Fund A, which also reflects in Chart that between 2013 mid to 2017 Fund B had a stellar out-performance over Fund A
- The Downside capture of Fund A has been 74.4 vs 84.6 for Fund B, which simply means that in a correction phase or a side moving market Fund A outperforms the Fund B
- The Max Draw-down of the Fund A has been -40% vs -43% of Fund B, reflective of the lower downside capture of the Fund A
So, If i am bullish and have aggressive risk profile should i not go for Fund B as my default choice?
In the end we are of the mindset that “Kitna deti hai ” of Maruti Suzuki ad. Below is the growth of Rs 10,000 invested on May 2008 in these funds.
if you are an SIP investor then a 1,000 Rs SIP Since 2008 May would have resulted in total investment of 136,000 over the last 11 years. Fund A would have accrued to 302,262 at the return of 13.39% vs Fund B to 287,844 and generated a return of 12.58%.
Expense ratios for Fund A 1.78% vs 1.82% of Fund B
Though all these are historic returns and are of regular growth fund type, which holds no promise of similar performance in future. Because the Fund A has got new fund managers to manage from Jul 2017 but Fund B has a stable fund manager at helm since 2005. Therefore, we would not know if the historic out-performance of Fund A on absolute returns will continue or not. After all these analytical information, which fund will you pick or chose. Please let me know your pick in the comment section. My pick will be Fund A.
To know my fund picks for large cap category, please read the category review of Large cap funds.
Those who are active DIY investor would have already realised the fund names but for others Fund A is ICICI Prudential Bluechip and Fund B is ABSL Frontline Equity.