“Only 10-yr rolling returns sahi hain”: AMFI to fund houses
The Association of Mutual Funds in India’s (AMFI) directive to fund houses regarding the use of projected returns in advertisements is a step in the right direction to curb mis-selling, say MF executives and distributors.
However, some say the efforts towards educating investors should be ramped up.
Reports last week said industry body AMFI has told fund houses they can only show 10-year rolling returns (compounded annually) while showcasing returns in their advertisements. They aren’t permitted to show future returns, even as illustrations.
Rolling returns are described as the average of annual returns over a specific time frame. They help determine how the fund has performed over the specific holding period, and give a more accurate and transparent picture to the investor.
On the other hand, point-to-point returns are specific to the period in consideration, and do not eliminate any recency bias.
“Rolling returns are definitely more accurate than point-to-point returns to showcase performance, and this regulation is important as it will enable investors to get a clearer picture,” said Pratik Oswal, head of passive funds at Motilal Oswal AMC.
According to Value Research, equity mid-cap funds have delivered close to 28% on a three-year basis and 20% on a 10-year basis, when calculated on a point-to-point basis. Similarly, small-cap funds have given over 35% and 21% over the same time periods.
In comparison, on a rolling basis, 3-year returns for mid-cap funds came in at 22.23%, while 10-year returns were 16.17%. For their small-cap peers, 3-year and 10-year returns on a rolling basis stood at 27.82% and 17.24%, respectively.
The move is said to have been triggered by markets regulator Sebi’s observations that many of the
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