Equity funds lag on risk-adjusted basis during 5-yr period

30% of equity schemes beat their benchmarks, show information ratios

- ABHISHEK KUMAR

One in three equity mutual fund (MF) schemes has beaten its benchmark on a risk-adjusted basis during the five-year period (2020-25), going by their information ratios (IRs), a performance metric fund houses have started publishing only lately.

An IR shows how effectively an investment manager generates excess returns relative to a benchmark, considering the risk taken. The IR generally ranges between 1.5 and -1.5. The higher the IR, the better is the fund manager's performance.

"A higher IR indicates that the fund manager is more consistent in generating returns relative to the benchmark, and a lower IR shows that the fund is underperforming against the benchmark," said Feroze Azeez, joint chief executive officer, Anand Rathi Wealth.

During the past five-year period, only 62 of the 208 active equity schemes, excluding sectoral and thematic funds, have had a positive IR.