Out of the 134 equity diversified schemes that are aged five or more years, around 16 of them have grossly underperformed the benchmark over all the periods mentioned
Moneylife has conducted a study to analyse which equity diversified mutual funds have constantly underperformed their benchmark over one year, two years, five years and since inception. Five years is a reasonable time for funds to prove their performance. However, out of the 134 equity diversified schemes that are aged five or more years, around 16 of them have grossly underperformed the benchmark over all the periods mentioned.
In various articles in the past and in our financial literacy seminars held by Moneylife Foundation, we have consistently pointed out that one should not go by the names or rather brand name of fund houses but by the performance of that particular scheme. The list of 16 contains a few big names, as well.
Life Insurance Corporation of India (LIC) would be your first choice while looking for an insurance product but do not make the same judgement when choosing a mutual fund. LIC Nomura MF has been infamous for its poor equity fund management. Moneylife has commented in the past on its meagre performance. In fact all of its equity funds have failed to perform. Three out of their five equity schemes—LIC Nomura Equity, LIC Nomura MF Opportunities and LIC Nomura MF Growth—are on the list of underperformers where the funds were launched five years back. The other two funds—LIC Nomura MF India Vision and LIC Nomura MF Top 100 were launched a few years back and have also underperformed their benchmark in the last one and two years.
HSBC Mutual Fund, part of the HSBC Group which has been managing assets for 25 years globally, has two of its funds on the list. HSBC Midcap Equity and HSBC Progressive Themes have given a return of around 10 percentage points lower than that of its benchmark in the last one year. The HSBC Progressive Themes Fund has given returns of -7% and -2% in the last five years and since inception, respectively, compared to its benchmark which has given a return of 3% and 7% in the respective period.
Tata Mutual Fund has two of its schemes on the list. Tata Capital Builder, launched in September 2006, has underperformed the benchmark by just a percentage point or so in all the periods. The Tata Service Industries Fund has done a bit worse though. It has given a return of -12% in the last ten years compared to its benchmark which has given a return of -5%. There has been a difference of 3-4 percentage points in the other periods as well.
Two schemes from Principal Mutual Fund, part of the Principal Financial Group which manages assets worldwide, have failed to perform, as well. In the last five years it has given a return of -4% whereas the benchmark returned 3%. Principal Services Industries Fund, launched in March 2006 has given a return of 2% since inception compared to its benchmark which returned 7% in the same period. Its mid-cap fund launched in November 2008, has underperformed the benchmark in the last one year and two years, as well.
One fund of SBI Mutual Fund—SBI Magnum Multi Cap—has underperformed its benchmark in all the periods. Whereas two other funds of SBI Magnum—SBI Magnum Sector Funds Umbrella and SBI Magnum COMMA Fund—have underperformed the benchmark in the recent one year and two year period but have outperformed in the five year period.
Reliance Equity Fund has failed to perform in all the periods. Well, this was not the lone underperformer of Reliance Mutual Fund. Older funds like Reliance Growth, Reliance Vision and Reliance RSF Equity have underperformed the benchmark in the last one year and two years as well. Holding a large stake of Reliance Industries in September 2011 may have well hampered their performance.
A fund house well known for their gross performance of equity funds is JM Financial Mutual Fund. This is one name you should certainly beware of. All of its equity funds have seen poor performance. The fund which has underperformed on all occasions is JM Equity. For the five-year period it has returned -6%, the lowest on the list, whereas its benchmark has returned 3%. The funds which have been launched within the five year period—JM Core 11 Fund and JM Multi Strategy Fund has given a return of 18 percentage points and 9 percentage points below their benchmark Return in the last one year. They have under performed the benchmark in the two-year period, as well. JM Basic Fund, too, underperformed the benchmark in the one-year, two-year and five-year period and somehow managed to beat the benchmark performance since inception.
Other funds which are a part of the list are IDFC Classic Equity Fund Plan A, UTI Contra Fund, Taurus Discovery Fund and ICICI Prudential Midcap Fund.
The airline has refused to provide information, asks for review of CIC order in view of ‘severe competitive market’
Moneylife has written about Central Information Commission (CIC) order on Air India for disclosing information about rolling out bigger jets for VIPs. Read http://www.moneylife.in/article/air-india-must-disclose-details-of-planes-rolled-out-for-vips/22766.html Air India, however, looks reluctant to provide details of travels of former civil aviation minister Praful Patel’s family. It has asked for a review by the decision by the same CIC, something that is not possible under the RTI Act.
While a review cannot be sought under RTI Act after a CIC hearing, a court stay order can be obtained. But neither did Air India give the information within the stipulated days, nor did it get a stay order from any court. In the review petition, CPIO at Air India has avoided mentioning the CIC dictat of revealing names of person(s) responsible for the decision of rolling our bigger jets on 25 April 2010 and 28 April 2010 to accommodate the in-laws of Mr Patel’s daughter for their trip to the Maldives.
The review petition reads, “The company, keeping in view its commercial interests, follows the practice of not disclosing the travel particulars of its valued passengers. Such information available to us not only in a fiduciary relationship But also amounts to invasion of privacy of an individual. The information therefore is denied in terms of Section 8(1)(d) and 8(1)(j) of the RTI Act, 2005. In the view of the severe competitive market, we request the Honourable Commission to review the decision on this particular point.”
RTI activist Subhash Chandra Agrawal has complained to the Central Information Commissioner Ms Sushma Singh, who had delivered the order to Air India about disclosing all information related to the matter. “Air India has now sought review of your verdict on this point. But firstly the RTI Act does not have any provision of review of verdicts by Honourable Central Information Commission itself. Secondly exemptions under section 8(1)(d) and (j) of RTI Act tried to be again claimed in review, were discussed in length at time of hearing of the petition,” he wrote to the CIC.
Mr Agrawal has asked the CIC to reject the Air India review petition, and asked for penal action against the CPIO. “It is unfair that Air India may hide serious irregularities of its Union minister by openly defying CIC verdict. Strict-most action should be taken against concerned ones at Air India especially at a time when the national carrier has been made a loss-creating a ‘white elephant’ by political rulers and officers dancing to their tune even after orders of the transparency watchdog,” says Mr Agrawal.
IRDA has approved a product whose brochure does not mention critical information of premium waiver in case of death of policyholder. While the company’s intent may not be in doubt, ambiguity is not good for insurer and the insured
Aegon Religare recently launched Educare, a traditional child plan. The product brochure does not mention about who pays future premium in case of death of the policyholder. While the insurer intends to offer waiver of premium (WoP), why does the brochure omit such an important line? Such elusiveness may be unintentional, but it is not in right spirit. It will only add to the confusion in case of any dispute. Strangely, the press release and website clearly specifies WoP and future premiums are waived respectively. The product brochure is important document as it is approved by Insurance Regulatory and Development Authority (IRDA).
Here is Aegon Religare response—“Educare Plan offers two ‘death benefit’ options the policyholder can select. If you refer to the payouts offered in both the options, one of them reads as—Guaranteed payouts as per the schedule above. This means that the policy continues as the premium is waived off by Aegon Religare Life Insurance. It is phrased differently to explain the same feature.”
But guaranteed payouts as per the schedule does not mention anything about who will pay the premium. It just specifies the guaranteed payment schedule in the last four years of the policy term. It is like saying we will take you from source to your destination, but the question is who will pay for the journey? It has to be explicitly stated and not as an implicit connection of dots.”
According to one broking firm, “Aegon Religare Educare does not mention anything about the future premium being waived both in option1 and option2 explicitly. However this may not be the intent. They have death benefits clearly defined in both the options.”
It can’t be assumed that every child plan will offer WoP and vice-versa not all plans which offer WoP is a child plan. There is no standardisation and every insurer drafts its brochure in its own way. As long as it clearly states important points, it is good customer service.
Reliance child plan, SBI Life Scholar II and ICICI Pru Smart Kid clearly state WoP in the brochure. Kotak Child Edu plan and Kotak Child Future plan states—No need to pay future premiums. Bajaj Allianz Childgain specifies “Premium waiver benefit”. There can be other flavours, too. IDBI Federal Childsurance Dreambuilder states—If either of parents dies, all future premiums are waived and invested as lump-sum in the plan.
Let’s hope Aegon Religare EduCare product gives a decent bonus to help save for child education. The plan gives guaranteed lump sum payouts during the last four policy years. It pays 50%, 25%, 25% and 20% of sum assured plus any declared bonus. The annual premium for a 30 year old person paying premium for 16 years (20 year policy term) and sum assured of Rs5 lakh is Rs44,590. It means you will pay premium of over Rs7 lakh for getting Rs6 lakh at end of 20 years. The only thing that will save you is bonus, which is non-guaranteed. Will you really be saving for child education?
Traditional child plans are popular due to secured returns, even if they are low. This is due to the appeal that parents are setting aside money for safe investment as well as covering the risk in case of their absence.