Please find the Morningstar Fund Awards Methodology here.
Morningstar Category Awards
The objective of the Morningstar awards was to recognize those funds that had delivered superior performance in 2008, but also had delivered strong risk-adjusted returns for investors over the long haul, relative to appropriate benchmarks.
The awards methodology therefore emphasizes the funds’ one-year performance, but funds must also have delivered strong 3-year risk adjusted returns in order to obtain an award. Morningstar risk measure uses utility theory to penalise funds more for downside variation in returns than for upside volatility, keeping in mind investor’ concerns.
On the equity side, there were three categories considered for the Morningstar Fund Award (India) exercise: Large Cap, Small/Mid Cap and ELSS (Tax Savings).
In Large Cap category, DSP BlackRock Top 100 Equity, co-managed by Apoorva Shah and Anup Maheshwari, received the award for its superior performance during the three-year period ended December 31, 2008.
During the one-year period, the fund registered -45.5% return, compared with its category average of -52.9% returns. On a three-year horizon, the fund outperformed its category peers by posting 9.6% return, compared with its peers’ average of 2.2%. The fund also performed well in terms of risk and was 20% less volatile than its peers as its portfolio managers increased the funds’ allocation to value stocks and trimmed allocation to growth stocks during the market downturn. The fund was rated 5-star during the three-year period.
Within Small/Mid Cap category, Reliance Growth, managed by Sunil Singhania, bagged the award owing to its strong performance during the three-year period.
The fund registered -54.1% return during the one-year, compared with its category average of -60.1%. During the three-year period, the fund outperformed its category peers, by delivering 4.6% return. In comparison, the Small/Mid Cap category peers delivered -6.4% average returns. In terms of risk, the fund was 12% less volatile compared with its category peers. The fund’s allocation to large-cap stocks benefited its performance during the period under review. The fund was rated 5-star by Morningstar during the three-year period.
Sundaram BNP Paribas Tax Saver, managed by Satish Ramanathan, was awarded the Morningstar Fund Award (India) within equity-linked savings scheme (tax savings) category.
During the one- and three-year period, the fund was placed at first position, generating -47.6% and 5.2% returns respectively. In comparison, the ELSS category registered -55.2% and 4.3% returns respectively. The fund was rated 5-star during the three-year period.
On the asset allocation side, moderate allocation and conservative allocation were the two categories considered for the award exercise.
Within moderate allocation category, DSP BlackRock Balanced received the award for its strong performance during the three-year period ended December 31, 2008. During the one- and three-year periods, the fund posted -38.0% and 7.6% returns respectively, compared with its category average of -33.9% and 3.5% returns respectively. The fund, co-managed by Apoorva Shah and Anup Maheshwari, was placed at first position and was rated 5-star by Morningstar during the three-year period.
Within conservative allocation category, Reliance Mutual Fund's Reliance Monthly Income Plan bagged the award.
The fund registered 9.6% return during the one-year period, compared with its category average of -4.8%. Within the three-year period, the fund posted 11% return, compared with its category peers of 6.8% return. The fund was ranked at first and second positions in one- and three-year periods. The fund is managed by Amit Tripathi and Amitabh Mohanty.
On the fixed-income side, Morningstar considered five categories for the award exercise: they were mainly liquid, short-term bond, intermediate/long term bond, short government and intermediate/long government.
Within the liquid category, LIC MF Liquid Fund, managed by Ashish Kumar, received the award. The fund was ranked at first position during the one- and three-year periods ended December 31, 2008. During the one-year period, the fund posted 9.5% return, compared with its liquid category peers, which registered 8.6% return. During the three-year period, the fund recorded 8.2% return, compared with category average of 7.5%. In terms of risk for the three-year period, the fund was 12% less volatile compared with its category peers.
In short-term bond category, ICICI Prudential Short Term, managed by Chaitanya Pande, received the award for its strong risk-adjusted performance within one- and three-year periods. During the one-year period, the fund registered 16.4% return, compared with its category peers average of 12.1%. During the three-year period, the fund was placed at first position and delivered 10.7% return. In comparison, the short-term bond category returned 9.1%. The fund was rated 5-star by Morningstar during the three- year period. There were 15 funds considered for the award exercise in this category.
Within intermediate/long term bond category, Fortis Flexi Debt Fund bagged the Morningstar Fund Awards (India). During the one- and three-year periods, the fund registered 23.9% and 13.3% returns respectively. In comparison, its category peers delivered 17.5% and 13.0% returns respectively. In terms of risk, the fund was 23% less volatile than its category average, during the three-year period. The fund, managed by Alok Singh, was rated 5-star during the three-year period ended December 31, 2008.
ICICI Prudential Gilt – Treasury, managed by Rahul Goswami received the award in the short government category. During the one- year period, the fund delivered 20.6% return, compared with its category average, which posted 10% return. On a three-year horizon, the fund registered 11.2%, compared with its peers’ average of 7.1%. The fund was ranked at second position during the one-year and three-year periods. The fund was rated 5-star during the three-year period.
Within the intermediate/long government category, Canara Robeco Gilt PGS, co-managed by Ritesh Jain and Suman Prasad, was accredited with the award. The fund posted 35.2% return during the one-year period, compared with 26.4% average return delivered by its peers. Within three-year period, the fund gave 14.6% average return, while its category posted 12.3% average return. In terms of risk, the fund was 17% less volatile than its peers as its portfolio manager dynamically alters the fund’s portfolio between cash and government securities depending upon favorable market conditions.
Morningstar Fund House Awards
Morningstar gives fund house awards in the following categories: Equity fund house and Fixed-Income fund house.
We scored fund houses by taking an average of their three-year Morningstar Ratings for all the open-ended funds they run that are available for subscription in the Indian market. Using the three-year rating ensures that we are looking at a meaningful length of time. Morningstar risk measure uses utility theory to penalize funds more for downside variation in returns than for upside volatility, keeping in mind investor concerns. Fund houses with at least 10 retail funds with Morningstar Ratings were considered for the award exercise.
Within the Equity Fund House category, Reliance Mutual Fund bagged the award for its superior performance across its equity schemes during the three-year period ended December 31, 2008. The fund house had 10 equity funds rated by Morningstar for the three-year period.
Within the Fixed-Income House category, ICICI Prudential Mutual Fund received the award owing to strong performance across its debt schemes during the three-year period. The fund house had 20 debt fund rated by Morningstar for the three-year period.