Oil extends gains in Asian trade, stays above $85

Prices were supported by rising equity markets in Asia after a rally on Wall Street following encouraging US company results

Oil prices extended gains in Asian trade today on optimism over the US economic recovery following positive jobs data along with easing global fears about Greece’s debt crisis, analysts said, reports PTI.

New York’s main contract, light sweet crude for June delivery, rose 43 cents to $85.60 a barrel.

London's Brent North Sea crude for June delivery was up 21 cents to $87.11 per barrel.

Prices were supported by rising equity markets in Asia after a rally on Wall Street following encouraging US company results.

Hong Kong shares were 1.3% higher in early trading and Tokyo's Nikkei was up 1.35% by noon.

Falling claims for US unemployment benefits had lifted the oil market yesterday.

The US Labor Department said that initial jobless claims fell for the second straight week, by 11,000, in the week ending 24th April.

The claims were higher than expected but still “suggest some sort of recovery in the US economy, giving support to crude oil prices,” said Serene Lim, a Singapore-based analyst with ANZ Bank.

The analyst said that news that a bailout package for crisis-hit Greece could be reached soon was also seen to boost the oil market.

Traders would be looking at the quarter-on-quarter US gross domestic product data due later Friday for cues on the economic recovery in the world’s largest economy and biggest oil consumer, the analyst added.


Gaining currency

Most Asian currencies are delivering better returns than their respective stock market indices.

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Weird benchmarks provide skewed perspective of fund performance

Many equity funds in India are benchmarked to obscure, unrelated benchmarks that give no sense of the actual fund performance

Mutual fund companies do not attempt to make fixed high returns on their schemes. You cannot judge a fund’s performance based on the absolute returns it generates. Funds always measure their performance against an external standard called the ‘benchmark index’. Fund mangers hope to beat the benchmark they have chosen to compare themselves against.

But is this comparison truly indicative of the fund manager’s performance in active stock selection? Not if the benchmark chosen is itself a skewed and obscure index that does not in any way reflect the fund scheme’s investment objective. A recent S&P-CRISIL study found that as many as 56% of the equity funds currently active are benchmarked to inappropriate indices. It is a classic case of comparing apples to oranges.

This aspect makes a mockery of the very idea of having benchmarks to compare against. Most often, fund companies get so carried away with the way they create schemes that they end up selecting weird benchmarks. The most ridiculous part of this is that, retail investors cannot track the performance of many of these benchmarks. So how is an investor supposed to analyse the performance of the fund?

A previous Moneylife study found that 13 sector funds are benchmarked to indices, which are strange constructs. Worse, data on the performance of these benchmarks are not available for public consumption. Funds use indices like the CNX Service Sector, S&P CNX Pharmaceuticals, CNX MNC Index and S&P CNX Media and Entertainment Index, which are paid indices. Only subscribers to these services can avail of the data for these indices.

There are several other instances of benchmarks not matching the fund’s investment objective. A mid-cap oriented fund may be benchmarked against the broader Nifty index or a small-cap fund to the BSE 500. Very often, fund performance is measured against popular benchmarks like the S&P CNX Nifty or the BSE Sensex without consideration of the size of the fund scheme or its investment style.

While fund companies in India are known to launch fancy schemes, these are also accompanied by even more lopsided and innovative benchmarks. UTI Growth Sector Fund, for instance, is so innovative that it actually uses two benchmarks that are both obscure—CNX Service Sector and S&P CNX Pharmaceuticals.
Investors in such funds should not go by the performance comparison offered by such twisted benchmarks. They should try and compare the fund performance with an index that is more relevant and suited to the fund’s investment strategy.




7 years ago

It would have been good to identify the funds in the article, which are not having appropriate benchmarks. This would further serve the purpose of your cause of 'investor awareness'

Narendra Doshi

7 years ago

Moneylife has identified this issue in the past. I am sure Moneylife can do great service to the RETAIL INVESTOR by identifying the most appropriate benchmark that one should consider (different from the one documented) for AT LEAST TOP 50 RETAIL Equity & Top 25 RETAIL Debt schemes, in the FIRST PHASE.

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