5 active large cap schemes offered double-digit SIP returns in 10 years

Actively-managed large cap schemes have been under spotlight in the last few years as they struggled to beat their passively-managed or index based large cap schemes. ETMutualFunds looked at the performance of these schemes over a long period of time to see how much returns they offered in 10 years. We looked at the SIP returns in 10 years. Five toppers, all actively-managed schemes, offered 12-13% returns in 10 years. Simply put, large cap schemes managed to deliver what they are supposed to do: offer double-digit returns over a long period.

Note, the underperformance of actively-managed large cap schemes is a recent phenomenon after the Sebi introduced benchmarks based on total return index in 2018. The emergence of index schemes or passive schemes added to the narrative of supremacy of passive investing. Mutual fund advisors say as the Indian market gets more integrated and well researched, active schemes will get fewer opportunities to outperform index. It happened in the developed markets and it may happen in India, they say. According to them, because of the peculiar situation in the stock market when only a handful of stocks were driving the market, many active schemes failed to beat their benchmarks. However, even after the rally became broad-based, active schemes failed to beat their passive counterparts.

Simply put, if you believe actively-managed schemes will not be able to beat their TRI-based indices or passive schemes, you should stop investing in them. Such investors can consider investing in Sensex- or Nifty-based index schemes to take care of their large cap investments. Mutual fund advisors and managers still believe that other mutual fund categories may still beat their benchmark indexes, especially in a bull market. However, if you prefer the simplicity of index schemes, you may opt for them. The only catch is that don’t grudge the extra returns made by active schemes.