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There are two ways to evaluate mutual fund performance, and they are as follows. 1. Trailing returns 2. Rolling returns Let us understand the two in detail with examples of Return percent of few mutual funds :

1. Trailing returns

Trailing returns are the returns generated over a given period. It can be the year to date (YTD), one year, three years, and so on. These are also called point to point returns. Trailing returns are the most relevant measures to evaluate the performance for a mutual fund. With trailing returns, you can see an excellent 10-year performance but a not so good one-year or five-year performance. The calculation of returns consists of the change in share price over a recent period plus any dividends earned per share over time.

2. Features of Trailing returns 

Most relevant – Used by mutual funds to publish performance over different time blocks:
  • Historical data is used for a block of period
  • Data is easily present at any point in time

3. Examples of Trailing returns

1.Tax saving ELSS Funds  returns till Feb 2018 

 

 

Trailing Return %

Scheme/Category Name

3 Months

1 year

3 years

5 Years

Axis Long Term Equity Fund – Growth

0.50%

21.60%

9.10%

22.80%

SBI Magnum Tax gain Scheme 1993 – Regular Plan-Growth

-2%

16.40%

7.10%

17.10%

Aditya Birla Sun Life Tax Plan – Regular Plan-Growth Option

-0.40%

25.80%

11.30%

21.10%

ICICI Prudential Long Term Equity Fund (Tax Saving) – Growth

0.30%

12.50%

7.60%

17.80%

HDFC TaxSaver-Growth Plan

-3.50%

17.10%

8.90%

18.20%

trailing return

4. Rolling returns

Technically speaking, rolling returns are the average annualised returns taken for a given timeframe on every day/week/month and taken till the last day of the duration. It measures the fund’s absolute and relative performance over some time at regular intervals. For example: Between periods at various intervals: Return every three months 2010-2015 or returns every six months from 2008-2018. Rolling returns take several such blocks of 3, 5 or 10-year periods at various intervals and see how the fund has performed over that period which makes this return more indicative of the actual performance of the fund. Due to different periods, the return consistency of the fund over the period can be analysed as it considers both upside and downside market trends. For example, if you have a three-year investment horizon (holding period) and want to see rolling returns of a mutual fund scheme from 1/1/2006 to 1/1/2016, you start by calculating the annualised return from 1/1/2006 to 1/1/2009 (change in NAV between 1/1/2006 to 1/1/2009, annualised). Next, calculate the annualised return from 2/1/2006 to 2/1/2009, then from 3/1/2006 to 3/1/2009, and so on.

5. Advantages of Rolling Returns

 
  • An effective measure to evaluate the performance of mutual funds
  • Accurate
  • Not biased towards any period
  • Provides proper insights to an investor
  • Suitable for a recurring (monthly or quarterly) or a SIP investor
  • Used for computing the mean return of the mutual fund
 

6. Examples of Rolling returns in Mutual Funds

A. Small and Mid-Cap Funds – Start date 1 April 2014 – Rolling returns for a period of three years at an interval of three months:

 

 

 

Key Parameters (Return %)

Return Consistency (% of times)

Scheme/Category Name

Average

Median

Maximum

Minimum

Less than 0%

0 – 5%

5 – 10%

10 – 15%

15 – 20%

Greater than 20%

Aditya Birla Sun Life Equity Fund – Growth – Regular Plan

17.72

17.24

24.98

12.33

0

0

0

10.74

76.03

13.22

SBI Small & Midcap – Regular Plan – Growth

31.21

30.49

39.73

24.76

0

0

0

0

0

100

HDFC Small Cap Fund – Regular Growth Plan

21.01

21.07

26.21

16.48

0

0

0

0

25.62

74.38

Axis Midcap Fund – Growth

13.77

12.7

22.51

8.59

0

0

8.26

68.6

10.74

12.4

ICICI Prudential MidCap Fund – Growth

18.05

16.92

29.2

11.79

0

0

0

20.66

60.33

19.01

B. Tax Saving ELSS Funds  – Start date 1 April 2014 – Rolling returns for period of 3 years at an interval of 3 months

 

 

 

Rolling Return (%)

Return Consistency (% of times)

Scheme/Category Name

Average

Median

Maximum

Minimum

Less than 0%

0 – 5%

5 – 10%

10 – 15%

15 – 20%

Greater than 20%

Axis Long Term Equity Fund – Growth

15.7

14.97

22.75

8.95

0

0

2.48

47.93

37.19

12.4

SBI Magnum Taxgain Scheme 1993 – Regular Plan- Growth

12.41

12.04

18.13

7.04

0

0

12.4

74.38

13.22

0

Aditya Birla Sun Life Tax Plan – Regular Plan – Growth Option

17.76

17.39

24.54

11.3

0

0

0

13.22

71.07

15.7

ICICI Prudential Long Term Equity Fund (Tax Saving) – Growth

11.67

10.71

20.07

7.37

0

0

34.71

52.07

12.4

0.83

HDFC TaxSaver-Growth Plan

12.2

11.45

19.52

8.17

0

0

13.22

74.38

12.4

0

The trailing return will show the way a fund has performed in the long run. Yet, it’s difficult to understand from this data as to how consistent the fund was during good and bad times which affects the return per cent to an investor. Rolling returns will give the overall yield of the fund over some time at specific intervals which will help the investor to choose the best fund in terms of performance and consistency. Though we mostly see the data in terms of trailing returns by fund houses and sites, rolling returns have also started gaining popularity among investors of mutual funds.  

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