Performance analysis of Nippon India MF Equity Funds
It’s now been more than six months post change of name and sponsor of the erstwhile Reliance MF to Nippon India MF (NIMF). The new name came after Nippon Life Insurance of Japan completed the acquisition of 75 per cent stake in Reliance Nippon Life Asset Management from Reliance Capital. Such a change usually raises question on the performance of the funds managed by the AMC.
In Indian context, it is not the first time that a new investor has taken over the old one in the mutual fund industry. There are cases, such as Invesco’s takeover of Religare Invesco Mutual Fund, which has actually improved the performance of the fund house in general. Besides, there is also an instance when BlackRock parted ways with its partner-DSP in the asset management business in 2018 with no material impact on the performance of the fund.
Prior to the change in management, the AUM of the fund house was continuously declining; however, it got arrested in the quarter ending December. There was a marginal increase in the AUM of the fund house in the same period. NIMF is now India’s fifth-largest asset management firm with MF Quarterly Average Assets Under Management (QAAUM) at Rs 2,04,370 crore at the end of December 2019. It used to hold a pole position before 2011.
Now, let us check the performance of the equity mutual funds managed by the fund house.
The above table clearly shows that the fund has done well in the international and sectoral funds however, has lagged in the performance when it comes to the pure equity funds such as multi-cap, focussed and large-cap dedicated funds. In their category, they find the place in the bottom quartile when it comes to the performance.
Going one step ahead, we tried to understand if such performance has to do anything with the size of the asset managed by the fund. We see that even fund with a lower base has performed badly in its category. For example, Nippon India Large-cap Fund, a fund dedicated to large-cap stocks, stands twenty-ninth out of 34 funds, in terms of performance. It has generated return of mere 10.68 per cent in the last one year, ending January 28, 2019. Against this, the category on an average has generated return of 15 per cent and the large-cap benchmark such as BSE 100 generated return of 13 per cent in the same period.
The worst part of the performance is that not a single fund from the fund house features in the top quartile in terms of performance while, 64 per cent of the total equity AUM lies in the fourth quartile.
One year may be a short period to judge a product meant for long-term, so, one should not ignore the trend.