We declared the Morningstar India Fund Awards 2019 last week and received a couple of queries that we decided to address.
Equity: Large Cap
- WINNER: Reliance Large Cap
- NOMINEES: Aditya Birla Sun Life Frontline Equity / HDFC Top 100 / Reliance Large Cap
Equity: Mid Cap
- WINNER: Franklin India Prima
- NOMINEES: Franklin India Prima / HDFC Mid-Cap Opportunities / ICICI Prudential Midcap
Debt: Medium to Long Duration
- WINNER: SBI Magnum Income
- NOMINEES: IDFC Bond Income / ICICI Prudential Bond / SBI Magnum Income
Debt: Short Duration
- WINNER: HDFC Short Term Debt
- NOMINEES: Franklin India Short Term Income / HDFC Short Term Debt / Sundaram Short Term Debt
Best Fund House: Equity
- WINNER: L&T Investment Management
- NOMINEES: Aditya Birla Sun Life AMC/ Franklin Templeton Asset Management (India)/ L&T Investment Management
Best Fund House: Debt
- WINNER: UTI AMC
- NOMINEES: Aditya Birla Sun Life AMC/ Franklin Templeton Asset Management (India)/ UTI AMC
Best Fund House: Overall
- WINNER: Aditya Birla Sun Life AMC
- NOMINEES: Aditya Birla Sun Life AMC, Franklin Templeton Asset Management (India), L&T Investment Management
The queries:
I really do not understand the criteria how ABSL has been declared Best AMC Overall. It just doesn't seem right.
I am surprised that Axis AMC isn't in that nominee list. They have had great year in equities.
Can someone please explain why the funds from Axis Mutual Fund were not considered in the Large and Mid Cap categories? The funds managed by Shreyas Devalkar have done exceedingly well.
Why did Franklin India Prima win an award? Why was Axis Mid Cap not nominated?
Morningstar Fund House Awards
These awards are given to the fund houses with the strongest performing fund line-ups on a risk-adjusted basis. Fund performance is evaluated within the Morningstar Categories.
Moreover, fund houses need to have a minimum of 5 funds each in Equity and Debt categories in order to be eligible for the Fund House awards. Money markets are not eligible for inclusion.
When it comes to the ‘Best Fund House – Overall’ award, we consider funds across the equity and fixed income categories.
Given the emphasis on the long-term track record, Aditya Birla Sun Life performed better than the peers and hence were declared the winners.
When it came to equities, Axis Mutual Fund had a great run in 2018. However, as mentioned, one of the selection criteria for the Best Equity Fund House Award is that the fund house must have at least 5 equity funds with Morningstar Ratings. Axis Mutual Fund did not qualify on this criterion.
Also, the fund house’s most recent launches have not even completed a 3-year tenure, and hence don’t have Morningstar Ratings. The few funds in the Unrated categories were not considered.
Morningstar Category Awards
The awards are annual, so we believe it is appropriate to emphasize a fund’s one-year performance. However, we do not believe that it serves investors well to give awards to funds that have posted a strong one-year return, but have otherwise not delivered good results for investors. Therefore, while the awards methodology emphasizes on the one-year track record, but funds must also have delivered strong 3- and 5-year returns after adjusting for risk within the awards peer groups in order to obtain an award.
We further use other filters, such as the funds must have been at least in the top half of their respective peer groups in at least three of the past five calendar years. We believe this combination will ensure that the awards are given to funds which have earned strong one-year results, and have also shown they have the ability to earn strong long-term returns without undue risk.
One of the criteria for short listing funds for category awards is that the current manager must be at the fund’s helm for more than three years, which is in line with our long-term focus. Although Axis Bluechip and Axis Midcap have good long-term track records, their current manager, Shreyas Dewalkar, has been at their helm only since November 2016, which fell short of a 3-year track record as on December 2018.
Since multi-cap, value, dynamic bond and gilt categories were not included in the Morningstar Awards, the calculation and scoring was not done for these categories.
Also, the awards are relative in nature within the category. So, although Franklin India Prima Fund had a negative return in 2018, it was still among the top performers within the category. Additionally, it also had a strong 3- and 5-year track record which earned the fund Best Mid-Cap Fund award.
The detailed methodology can be accessed here.
