ANALYSIS OF RISK ADJUSTED MEASURES OF SELECTED LARGE-CAP EQUITY MUTUAL FUNDS IN INDIA

Abstract

A mutual fund is an investment programme which are funded by unit holders and professionally managed for trading in diversified holdings. They pools money from many investors to purchase securities. Large-cap equity mutual fund invests more than 75% in large-cap stocks mentioned by CRISIL. Risk-adjusted return is the amount of risk involved in getting an acceptable level of return. In this research article, the researcher has analyzed the risk-adjusted returns of ten large-cap equity mutual funds. The performance of the selected mutual funds were analyzed from January 2012 to December 2016. The risk-adjusted return of the mutual funds were manually calculated and measured with the help of Sharpe Ratio, Treynor Ratio, Jensen Ratio and Information Ratio. These ratios can be applied to individual securities and portfolios. The greater the value of the ratios, the more attractive and better are the risk-adjusted returns of the mutual fund schemes. All the funds generated positive returns for the risk taken according to Sharpe, Treynor and Jensen Ratios for the years 2012, 2014 and 2016 and generated negative returns for the years 2013 and 2015. Spearman’s Rank Correlation was used to identify the relationship between the ranks of the mutual funds as per each risk-adjusted measures. When comparing two or more investments avenues, an investor must always compare them using same level of risk to get a relative performance perspective.