There are 500-odd mutual fund (MF) schemes in the market today. Every month, a new bunch of schemes joins the fast-growing list.

To be on the top not only demands a cutting-edge fund management strategy, but also the energy to stay there. Every quarter is a fresh beginning, where the toppers fight a new battle to hold on to their respective rankings. So, it’s natural that only a few make the cut.

Among the 160-odd MF schemes that we rated, (with a track record of three years or more), only 18 schemes were assigned the Platinum rating, the highest rating assigned to any scheme.

DSP Merrill Lynch Equity fund emerged the topper among diversified equity funds, Principal Tax Savings among tax-saving funds and SBI Magnum Balanced among balanced funds.

Among the debt-oriented schemes, Templeton MIP Equity got the Platinum edge among monthly income plan (MIP) funds and ICICI Prudential Long Term among debt funds. These funds have all been rated on the basis of the Sortino ratio, a superior risk-adjusted return measure of MF performance (see adjacent box).

With a Sortino ratio of 7.7, DSP Equity has bagged the No 1 spot in the equity diversified funds category. While it managed to quadruple returns in the past three years, the fund’s very low risk score helped it post a scintillating sverall performance.

It has managed to beat its benchmark returns both over the short and the long term. The Rs-208 crore Principal Tax Savings leads the tax-saving equity funds category. It has outperformed the Nifty, its benchmark index, over the short term and the long term.

The fund has done well in the past one year, giving a 59% return vis-à-vis an average return of 41% for the other
tax-saving funds that were rated by us.

Magnum Balanced topped the ratings among balanced funds. Most balanced funds increased their equity holdings after the regulation that mandated 65% of assets be invested in equities to get a tax-free status for dividends. Magnum Balanced has invested 68% of its assets in equities.

Among debt funds, ICICI Pru Long Term finds itself at the top of the charts. It generated 29% returns — the highest in the past three years. It has managed to give 9% more than the next best fund. Interestingly, ICICI Pru Long Term maintains a shorter term portfolio today. It has an average maturity of around 18 days.

Templeton MIP Equity has the Platinum edge in the MIP category. MIPs have a seasoning of equities, though predominantly they invest in debt instruments. Over the past three years, Templeton MIP Equity has generated 32%  returns.

Source: E.T.