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MF Query Board

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It is true that on a trailing return basis the fund has slipped a lot. But even the index is not doing well on account of the corona virus concerns. If we look at its trailing one-month returns, it stands at negative 27.37 per cent. In the past three months, not only has it underperformed its benchmark (Nifty Small-Cap 100 TRI) but also against its category. This surely might have invoked a sense of anxiety in you. In short-term equity it is often very volatile. Therefore, it is better to check its performance across a longer period and check not just its trailing but also rolling performance.

The following table would show you the trailing performance of funds across different periods as against benchmarks and categories:

As can be seen from the above table, the fund has been a consistent underperformer against its benchmark. However, it has outperformed its category in three-year, five-year and 10-year periods. Even its Sharpe ratio is negative 2.74 and Sortino ratio is negative 3.54. If we compare the same with its category then it stands at negative 1.75 and negative 2.30 respectively. This means that there are more such funds which gave better risk-adjusted returns than HDFC Small-Cap Fund. Even the sector allocation is quite opposite to its category. For instance, as of now the automobile sector is not favourable and yet its exposure to it is more compared to the category. Such a contra view might be dragging the performance of this fund in such a volatile market.

As of now, looking at its long-term performance it was successful in outperforming its category. Even in terms of rolling returns, it has outperformed its benchmark with average three-year rolling returns at 19.34 per cent and its benchmark at 13.64 per cent. Even if we look at its returns’ distribution, 56.39 per cent of the times it gave returns between 20 to 30 per cent. On the contrary, 47.96 per cent of the times the benchmark gave returns between 10 to 20 per cent. This shows that on a rolling basis this fund has performed well. Therefore, if you have invested in this fund with a view of holding it for long-term, then stay invested.


I am 35-year-old and wish to plan for my retirement. While looking out for solutions I found various mutual funds offering retirement plans. Should I opt for them?

- Ranjit Ravetkar

Retirement is a very sensitive subject and most of the people ignore it in order to fulfill other short-term wants. However, it is good to know that you are making an attempt at planning for your retirement at an early age. For retirement plans in mutual funds, there are ideally three types of allocations based on risk undertaken: one with more equity allocation, one with less equity allocation and finally the balanced approach. Like other mutual funds these kinds of funds are also subject to market risks. This means that if the markets start nose-diving, they too will fall. However, if you invest in them diligently then these may prove to be a safe bet. The following table would show you the performance of the overall category across various periods: 

It can be seen from the above table that though the average category returns are not that exciting, yet when the market falls, funds from these categories tend to fall lesser than the market. This shows that these funds have better downside protection. However, these would tend to underperform the market during a bull run. And this can prove to be one of the concerns for attainment of your required retirement corpus. Therefore, to avoid such a scenario it is better to have a proper retirement plan in place wherein you would derive the required retirement corpus based on various parameters and then to accumulate the corpus rather than investing in these retirement-oriented funds. It is advisable to start investing via a systematic investment plan (SIP) with proper asset allocation and re-balancing strategy in place. Make sure that you review this plan annually to account for any personal or external changes.

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