CRISIL – Meaning
CRISIL, formerly called the Credit Rating Information Services of India Limited, is a global analytical company that presents ratings, research, and risk and policy advisory services.
CRISIL, which offers a myriad of financial services globally, is highly recommended for mutual funds’ analysis and ratings. The CRISIL Mutual Fund Ranking (CMFR) process boasts of best global practices for categories such as equity, debt, and hybrid asset classes while gaining high acknowledgment among investors, intermediaries and asset management companies.
While most other ranking models are based on returns or net asset value (NAV), CMFR uses a combination of NAV and portfolio-based attributes for evaluation that provides a single point analysis of mutual funds, taking into consideration key parameters such as risk-adjusted returns, asset concentration, liquidity and asset quality.
CRISIL’s mutual fund ranks are assigned on a scale of 1 to 5, of which CRISIL Fund Rank 1, indicating ‘very good performance’ stands for the top 10 percentile of funds in any peer group and the next 20 percentile fall under CRISIL Fund Rank 2.
CRISIL – Rationale
CRISIL’s ratings that are based on different time frames, namely 3 years, 5 years or 10 years, are combined together to give a single measure of risk-adjusted performance of a fund. Once the ratings are calculated, CRISIL assigns stars to these funds on the basis of the percentile in which they are positioned. The top 10% funds are assigned a 5-star rating, while the bottom 10% funds are slapped with a 1-star rating. The rating is a composite measure of both return and risk, which helps one figure out the ability of the funds to deliver returns, even with risks involved.
CRISIL – List
Below is a table representing a few examples of how CRISIL rates different funds:
|TATA Equity PE Fund- Rank 1||Franklin India Low Duration Fund- Rank 1||HDFC Balanced Fund- Rank 1||
Indiabulls Liquid Fund- Rank 1
|DSP BlackRock Opportunities Fund- Rank 2||BOI AXA Corporate Credit Spectrum- Rank 2||DSP BlackRock Balanced Fund- Rank 2||Axis Liquid Fund- Rank- 2|
CRISIL – Reliability
CRISIL Ratings for mutual funds describe all the variables in their rating methodology description which makes them a reliable source. Not only that but they also If analyze every fund based on their past performance and their quantitative metrics. Here’s a list of some parameters that CRISIL considers while ranking mutual funds:
- Superior Return Score: It is the relative measure of the schemes’ returns and risk compared to their peer group
- Mean Return and Volatility
- Portfolio Concentration Analysis
- Liquidity Analysis
- Modified Duration/ average maturity: It captures the interest rate risk of the portfolio.
- Historic CRISIL Mutual Fund Ranking Performance