Our Analyst Rated Funds Outperform

Our rated equity funds have a high success rate in terms of recommendations. We look at how they performed.
By Niranjan Risbood |  20-05-14 | 
 
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About the Author
Niranjan Risbood is Director - Fund Research (India) with Morningstar. He would like to hear from you, but he cannot provide individual-portfolio or financial-planning advice.

At Morningstar, we have two ratings.

One is the Star Rating, which assigns 1 to 5 stars based on a fund's past risk- and load-adjusted returns versus category peers. This is a backward-looking rating.

The Analyst Rating is the summary expression of Morningstar's forward-looking analysis of a fund. It is based on the analyst's conviction in the fund's ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over the long term.

If a fund receives a positive rating of Gold, Silver, or Bronze, it means Morningstar analysts think highly of the fund and expect it to outperform over a full market cycle of at least five years. To understand these ratings in more detail, read How the fund analyst rating is arrived at.

Out of the 30 equity funds which are rated Gold, Silver or Bronze – only 7 have underperformed their respective indices. This shows a success rate of almost 80% in terms of recommendations.

Worth noting though is that the degree of outperformance varies across the 22 funds.

  • To arrive at this calculation, the month-end closing NAV and index value for the month in which the rating was issued and the NAV and index value as of May 19, 2014 was considered.
  • The returns and degree of outperformance/underperformance are absolute and since rating.
  •  All figures are in percentage terms. 
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Larissa Fernand
May 23 2014 01:08 PM
Dear Gaurav,
Thank you for pointing out this discrepancy. Our fund research head Niranjan Risbood has said to clarify that there has been absolutely no intention of window dressing the performance. In both cases mentioned – HDFC Top 200 and Franklin India Bluechip, there was an error while working on the data at our end. And we apologise. We thank you for pointing it out and the change has been made in the above table.

Dear Dhruva,
ICICI Prudential Dynamic was upgraded to Bronze in November 2012 as per our records. Niranjan has considered the dates on which the funds got categorised into either bronze, silver or gold, as the start date for his analysis.
IDFC Premier was rated as Bronze from September 2011 as per our records in our database Morningstar Direct.

Thank you both for taking the time to share your observations.
Sincerely,
Larissa
Editor
Gaurav Gupta
May 23 2014 02:24 AM
i have followed morning star's work for some time now. i have always admired it, but i am disappointed to see that you are giving out incorrect data. for example, your website is saying that the first hdfc top 200 report is on march 2010, but your scorecard says rating month is june 2011 i.e. after more than 1 year. the website shows franklin bluechip report with a gold rating in april 2012 and silver rating in march 2011, but the scorecard says may 2011 is the start date. in other cases like dsp top 100, you have shown the december 2010 date correctly. why is there such inconsistency in your scorecard. are you trying to window dress the performance of your recommendations? this is not expected from morning star.
Dhruva Chatterji
May 22 2014 05:30 PM
i think icici pru dynamic was upgraded to silver rating in dec 2013 and not nov 2012. And idfc premier equity was also upgraded to silver frm bronze in dec 2013 and not sep 2011. pls correct me if i am wrong.
SATISH DABHOLKAR
May 22 2014 04:19 PM
If Modi Government have not came into power whether these funds have outperformed?
We know mutual fund gives good return but no one knows when it will start giving the same as it depends on various reasons.The investors do not take these funds into account while planning for the future,though mutual fund industry may say different stories.
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