In an attempt to provide better disclosure to investors, DSP BlackRock will now disclose performance of its active equity mutual funds with the Total Return Index (TRI) as a benchmark.
Investopedia defines it as an equity index that tracks both the capital gains of a group of stocks over time, and assumes that any cash distributions, such as dividends, are reinvested back into the index. Looking at an index's total return displays a more accurate representation of the index's performance. By assuming dividends are reinvested, you effectively account for stocks in an index that do not issue dividends and instead, reinvest their earnings within the underlying company. For example, the Sensex Total Returns Index and the Nifty Total Returns Index.
Funds showcase performance against a benchmark. However, the performance of the mutual fund scheme is a function of dividend as well as the capital gains made on investments, while the returns on the benchmarks are considered without any dividend income.
Total return, when measuring performance, reflects the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Hence, total return is viewed as a strong measure of an investment’s overall performance and an apt measure to reflect the true alpha created by mutual funds.
The AMC hopes that this will give the right picture of the real alpha generated by active fund management. Total return also determines an investment’s true growth over time.
