CRISIL Fund Insights

year, then switched the

investment to a moderate

fund at the 40th year and

finally to a conservative plan near the time of retirement (say at the 55th year), he

would have earned Rs 51.12 lakhs (Average returns for seven year period from

table 2 considered for calculations) at the end of the 60th year when he retires as

compared to the total investment of Rs 4.20 lakhs (principal invested). A similar

monthly investment in a single asset class such as the most preferred recurring

bank fixed deposit (assuming an interest rate of 8% per annum) would have

generated Rs 23.32 lakhs over the similar 35 year period .

Further any increase in contribution during the vesting period in the life cycle fund

would add to the corpus collected at the end of the period (see green dotted line in

Chart 1). Investors should, however, be committed to staying invested in these

funds on a long-term basis. (See red dotted line in Chart 1).

Lifecycle funds offer a one-stop solution for retirement planning as per one's life stage. They help to do away with self-guided asset allocation and aid in choosing the

right plan at different life phases to build a retirement corpus as well as to meet their other lifetime goals such as buying a home, etc. Investors must however do a proper

financial planning and due-diligence before investing in these funds. Investors should also look at the costs involved including exit loads (ranging 0.5-3% till one-three

years) and taxation (funds with over 65% equity exposure would be taxed like equity mutual funds, the rest would be taxed like debt funds, fund of funds would be

taxed like debt funds) before investing in these funds.

Summing up

Life cycle funds globally

Lifecycle funds in India

Performance

Globally, lifecycle funds are classified into target date funds and target risk funds. Target

date funds or age-based funds have an investment horizon where asset allocation

automatically changes to conservative from aggressive as the investor approaches

retirement (or a target date). On the other hand, target risk funds are based on risk

preference and keep asset allocation fixed as per the risk profile - conservative,

moderate and aggressive. Investor's risk profile is considered as proxy of his/her age.

Both target date funds and target risk funds have an asset allocation policy that

gradually reduces equity exposure and increases debt exposure during the course of

the investment horizon or till the investor reaches retirement. The switching of funds and

accordingly the underlying asset allocation happens automatically for target date funds while an investor needs to take a call on switching plans under target risk funds.

Most lifecycle funds available in India are fund of funds on the mutual fund platform and are based on target risk theme. In India, the risk theme for any asset allocation policy

ranges between three (aggressive, moderate and conservative) and five variations (the afore-mentioned three types plus very conservative and very aggressive). Some fund

houses also provide target date funds that take age as a proxy for the investor's risk profile and accordingly allocate the portfolio. Most funds do not provide an auto switch

option in their plans, and hence investors need to track their risk profile / target date to switch between plans.

The National Pension System (NPS), established under the Pension Fund and Regulatory Development Authority of

India (PFRDA) also provides investors with an Auto Choice option that is based on the target date theme. Under the

Auto Choice option, the asset allocation changes from aggressive to conservative as the investor nears the retirement.

The funds invested across the three asset classes provided under NPS (equities (E class), corporate bonds (C class)

and government securities (G class)) is determined by a pre-defined formula linked to investor's age.

The performance of life cycle funds in India gives a fair idea about the product as a one-stop solution for retirement

planning from a long-term perspective. The performance of these funds that are based on the lifecycle theme shows

that aggressive, moderate and conservative plans have outperformed their respective benchmarks in all the

timeframes taken into analysis (Table 2).

Chart 1 shows how an investor can create a plan for retirement by switching from aggressive to moderate and then to

conservative as he approaches retirement. If an investor had started monthly SIP of Rs 1,000 in an aggressive fund at

the beginning of his 25th

Lifecycle funds – One-stop solution for retirement planningRising costs of living and lack of social security in India have brought the importance of retirement planning to the fore. Most investors start saving

for their sunset years only when they are 40+. That is too late. For a comfortable post-retirement life, one must invest through one's lifetime.

Remember, investment needs change over time based on one's age, social status, dependencies, addition to family, liabilities and employment.

Lack of knowledge or time to choose the right allocation may result in under or over exposure to risks vis-à-vis investor's goals and risk preference.

The basic thumb-rule is that an investor should have a conservative approach as he/she nears retirement. However, managing and consistently

reviewing the investments made can be a daunting task for investors, especially those who are not well-versed with the basics of financial

planning. Lifecycle Funds take care of this dilemma and help to invest as per one's life stage.

Investmentthoughts

Monthly funds newsletter from CRISIL Research

CRISIL FUNDINSIGHTS

Volume - 20 December 2012

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Lifecycle funds – An alternative

Lifecycle funds are hybrid funds, where allocation to debt and equity changes over the life cycle of the investor. These funds work on the life cycle theory which states that an

investor goes through various life stages wherein the investment needs keep on changing. Investors typically go through three stages – accumulation, consolidation and

distribution. See Table 1 for asset allocation across the life stages.

Life cycle stage Accumulation Consolidation Distribution

Age 25-45 45-60 60 & above

Working career Early-to-middle years Mid-point Retirement

Risk appetite High Medium Low

Risk profile Aggressive Moderate Conservative

Equity exposure High Low - Medium Low

Debt exposure Low - Medium Medium - High High

Cash exposure Low Medium High High

Table 1: Asset allocation across life stages

Source: CRISIL Mutual Fund Database, Sorted by tenure

Plans 3 Years 5 Years 7 Years*

Aggressive

Moderate

Conservative

Average 8.28 4.87 12.57

S&P CNX Nifty 5.12 0.28 11.05

Average 8.24 6.93 11.16

CRISIL BalanceEx 6.15 3.55 10.13

Average 7.05 6.99 8.57

CRISIL MIPEX 6.91 6.34 7.51

Table 2: Performance of lifecycle funds

Aggressive includes funds having equity exposure more than 60%, moderate more than 30% and conservative less than 30%.Annualised returns as of December 17, 2012 *Maximum period for which schemes under this category are availableCRISIL BalanceEx is the benchmark for equity oriented hybrid mutual fund schemes with higher proportion to equity (upto 65%) CRISIL MIPEX is the benchmark for equity oriented hybrid mutual fund schemes with lower proportion of equity (less than 30%)

Rs 5.33 Lakhs

Rs 2.40 Lakhs

Rs 32.87 Lakhs

Rs 51.50 LakhsRs 51.12 Lakhs

25th year 40th year 55th year 60th year

Accumulation Phase -Investor invests in aggressive plan

Monthly SIP of Rs 1,000

Consolidation Phase -Investor invests in

moderate plan

Distribution Phase -Investor invests in conservative plan

Chart 1: Performance of lifecycle funds for retirement planning

Note: Average returns for seven- year period (from Table 2) are considered for calculations.Green dotted line denotes the rise in retirement corpus due to increase in contribution during the vesting period.Red dotted line highlights the advantage forgone by discontinuing the SIP investments.

Fund news

l The Indian equity market (S&P CNX Nifty) gained 4.6% in November following positive developments in the domestic and international markets.

l Moody's decision to retain its stable outlook on India’s sovereign rating and Goldman Sachs upgrading India to 'overweight' from 'market-weight' left a positive impact on the market.

l Market sentiments received a fillip as the government mustered the numbers in Parliament to pass the bill pertaining to foreign direct investment (FDI) in the retail sector.

l On the global front, the International Monetary Fund (IMF) and the euro zone finance ministers’ plan to reduce Greece’s debt provided relief to the market.

l The market also strengthened following buying by foreign institutional investors (FIIs); FIIs were net buyers of equities worth Rs 10,967 cr in November 2012 compared to net buying of Rs 10,273 cr in October 2012. The year till date saw net buying of Rs 1,05,020 cr by FIIs till November 2012 vis-à-vis selling of Rs 3,290 cr in the same period last year.

l However, the gains were capped following US-related fiscal worries and some weak domestic economic indicators (like unexpected contraction of the index of industrial production in September 2012 and a record-high trade deficit in October 2012).

l Most sectoral indices closed higher for the month except the CNX Energy Index which fell due to rise in global crude oil prices.

l CNX Realty Index was the top gainer, up 13.84%, driven by returns posted by index heavy weight Unitech on news of its settlement with Telenor.

l Among other gainers, CNX FMCG advanced 7.08% as investors continued to prefer defensive bets amidst volatility in the market.

Indices

November

30, 2012

October

31, 2012

Absolute

Change

%

Change

Indicators October 31, 2012

10 Yr Gsec 8.21%8.18%

Monthly WPI Inflation 7.24% (November 2012) 7.45% (October 2012)

Mutual Fund Overview

l The Indian mutual fund industry’s month-end assets under management (AUM) rose by 3.25% (Rs 24,994 cr) to Rs 7.93 lakh cr in November; the highest month-end assets for the industry since April 2010.

l The rise in the AUM was primarily due to inflows into liquid funds, which saw net inflows of Rs 11,414 cr in November and comprised over 90% of the total inflows (of Rs 12,574 cr) seen by the industry in the month.

l Inflows in liquid funds are cyclical as corporates invest their short term surplus in this category during the quarter before withdrawing to meet their advance tax requirements in the last month of the quarter.

l Equity funds assets rose by 3.5% (Rs 6,461 cr) to Rs 1.90 lakh cr despite outflows (Rs 1,525 cr) for the sixth consecutive month. The rise in assets was due to mark to market gains with the S&P CNX Nifty up by 4.6% during the month.

l Gilt funds continued to report sharp rise in its assets due to inflows of over Rs 1,018 cr and Rs 1,006 cr, respectively, in October and November. The AUM of gilt funds rose to Rs 5,426 cr in November as the category is expected to benefit when the RBI reverses its stance on interest rates as prices and yields move in opposite directions. A fall in interest rates would result in a rise in bond prices and positively impact gilt fund’s net asset value (NAV).

November 30, 2012

1. Banks2. Computers - Software3. Pharmaceuticals4. Refineries/Marketing5. Engineering6. Cement7. Cigarettes8. Housing Finance9. Oil Exploration10 Commercial Vehicles

1. ICICI Bank Ltd.2. HDFC Bank Ltd.3. Infosys Ltd.4. ITC Limited5. Reliance Industries Ltd.6. Larsen & Toubro Ltd.7. HDFC Ltd.8. State Bank Of India9. Tata Consultancy Services Ltd.10. Tata Motors Ltd.

Top Stock Exposures - November 2012 Top Sector Exposures - November 2012

Note:- The month-end portfolios as of November 2012 and quarterly average assets under management (AUM) as of September 2012 have been considered for the report.

Exits

Take Solutions Ltd.

Accelya Kale Solutions Ltd.

New Stocks Entries and Exits in Mutual Fund Portfolios - November 2012

Entries

Balaji Telefilms

Disa India Ltd.

Nitin Fire Protection Industries Ltd.

Siti Cable Network (P) Ltd.

Market - Overview

S&P CNX Nifty 5880 5620 260 4.63

BSE Sensex 19340 18505 835 4.51

l Gold exchange traded funds (gold ETFs) saw inflows of Rs 270 cr in November while category assets touched a record high of Rs 11,918 cr (up 3.9% or Rs 441 cr from the previous month). Except for two months, gold ETFs have witnessed net inflows during the current calendar year. Gold prices (as per the CRISIL Gold Index) rose by 1.31% during the month.

l On the regulatory front,

- Securities Exchange Board of India (SEBI) notified investment norms for debt-oriented mutual fund schemes' investment in housing finance companies.

- SEBI allowed Liquid Index ETFs to trade in the short selling market, as part of changes in the securities lending and borrowing (SLB) framework. SEBI said that an Index ETF would be considered 'liquid', if it has traded on at least 80% of the days over the past six months and if its impact cost over the past six months is less than or equal to 1%.

- SEBI included closed ended mutual funds in addition to ETFs (subject to eligibility norms) in the investment avenues eligible for tax benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS). New retail investors with annual income below or equal to Rs 10 lakh would be eligible for a 50% tax deduction under section 80CCG on investments up to Rs 50,000 in the equity savings schemes.

Large Cap Funds 4.74 -1.10

Diversified Equity Funds 4.57 -0.66

Small and Midcap Funds 4.88 0.08

Balanced Funds 3.76 -0.46

Monthly Income Plans 1.48 0.38

Long Term Gilt Funds 0.67 0.49

Long Term Debt Funds 0.67 0.57

Short Term Debt Funds 0.64 0.78

Ultra Short Term Funds 0.66 0.76

Liquid Funds 0.68 0.70

Gold Funds* 1.31 -1.13

*CRISIL Gold Index

Categories as of CRISIL Mutual Fund Ranking September 2012

Absolute Monthly Returns%

Category/Index returns Nov 2012 Oct 2012

CRISIL FUNDINSIGHTS

l UTI Mutual Fund and Oriental Bank of Commerce entered into a tie-up for distribution of the former’s schemes.

l Daiwa Mutual Fund decided to adopt a scheme transfer method to exit its domestic fund business; it will soon look around for potential

buyers for the fund’s portfolios.

l L&T Finance completes the acquisition of Fidelity’s mutual fund business in India.

(Ne

t F

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(AU

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cr)

No

v-1

1

No

v-1

2

De

c-1

1

Ja

n-1

2

Fe

b-1

2

Ma

r-1

2

Ap

r-1

2

Ma

y-1

2

Ju

n-1

2

Ju

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2

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p-1

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Oct-

12

-100000

-50000

0

50000

100000

5.8

6.2

6.7

7.1

7.5

8.0 Net flows (Rs cr) Industry AUM (Rs lakh cr)

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Fund focus

Investment Approach

Performance

ICICI Prudential Balanced Fund (CRISIL Fund Rank 1)Launched on November 3, 1999, ICICI Prudential Balanced Fund is an equity-oriented hybrid fund with average assets under management (AUM) of Rs 344 cr as of September 2012. Unlike the category, whose assets have decreased by close to 2% over the past year, the fund’s AUM has grown by nearly 20%. The fund is ranked CRISIL Fund Rank 1 (top 10 percentile of the CRISIL Mutual Fund Rankings) since the past quarter and has been in the top 30 percentile since March 2011.

The fund aims to invest 65% to 80% of its corpus in equities and equity-related securities and the balance in debt and money market instruments. The fixed income component in the fund reduces the overall risk of the portfolio. For tax purposes, balanced funds (with a greater than 65% equity holding) are treated like equity-oriented funds wherein dividends and long-term capital gains are tax free.

As on December 11, 2012, the fund has outperformed its benchmark (CRISIL BalanceEX) across various time frames analysed (Chart 1) and has outperformed the category over the one, three and ten-year periods.

Average Assets under Management - A Bird's Eye View

HSBC Mutual Fund 4992 4554 438 9.61

Peerless Mutual Fund 4792 4009 783 19.52

PRINCIPAL Mutual Fund 4771 4660 110 2.36

Goldman Sachs Mutual Fund 4304 4313 -8 -0.20

L&T Mutual Fund 3883 3046 837 27.48

BNP Paribas Mutual Fund 3842 4562 -720 -15.78

Taurus Mutual Fund 3600 3745 -145 -3.88

Morgan Stanley Mutual Fund 2354 2250 103 4.59

Union KBC Mutual Fund 2349 2034 315 15.46

Indiabulls Mutual Fund 2243 2165 78 3.61

Pramerica Mutual Fund 1978 2387 -409 -17.12

AIG Global Investment

Group Mutual Fund 977 739 238 32.24

ING Mutual Fund 935 923 13 1.37

Daiwa Mutual Fund 789 710 79 11.15

Motilal Oswal Mutual Fund 529 453 76 16.67

Mirae Asset Mutual Fund 501 464 37 7.97

Edelweiss Mutual Fund 306 380 -74 -19.39

BOI AXA Mutual Fund 273 135 138 102.81

Sahara Mutual Fund 238 787 -549 -69.71

Escorts Mutual Fund 230 196 34 17.27

Quantum Mutual Fund 216 193 23 12.11

IIFL Mutual Fund 193 167 26 15.54

Grand Total 747333 692789 54544 7.87

HDFC Mutual Fund 97774 92625 5149 5.56

Reliance Mutual Fund 86327 80694 5632 6.98

ICICI Prudential Mutual Fund 76388 73050 3338 4.57

Birla Sun Life Mutual Fund 72904 67206 5699 8.48

UTI Mutual Fund 70783 60923 9860 16.18

SBI Mutual Fund 50959 47184 3775 8.00

Franklin Templeton Mutual Fund 39046 35533 3513 9.89

Kotak Mahindra Mutual Fund 30316 25324 4993 19.71

DSP BlackRock Mutual Fund 30227 30002 226 0.75

IDFC Mutual Fund 28004 27147 858 3.16

Tata Mutual Fund 20247 20754 -506 -2.44

Deutsche Mutual Fund 16807 13852 2955 21.33

Sundaram Mutual Fund 13669 13228 440 3.33

Religare Mutual Fund 12656 10958 1697 15.49

Axis Mutual Fund 10490 8759 1732 19.77

JPMorgan Mutual Fund 8989 5281 3708 70.22

Canara Robeco Mutual Fund 7329 7580 -251 -3.32

Fidelity Mutual Fund 7031 7378 -347 -4.71

LIC NOMURA Mutual Fund 6356 5919 436 7.37

Baroda Pioneer Mutual Fund 5702 5511 191 3.46

JM Financial Mutual Fund 5624 5812 -188 -3.24

IDBI Mutual Fund 5413 5198 214 4.12

Mutual Fund Name

Jul-Sep2012

Jul-Sep2012

Apr-Jun2012

Apr-Jun2012Change

(Rs.Crore)%

Change

AAUM is the quarterly average number and excludes Fund of Funds

Mutual Fund Name(Rs.Crore) (Rs.Crore)Change

(Rs.Crore)%

Change(Rs.Crore) (Rs.Crore)

Rs 10,000 invested in the fund since April 1, 2002 would have grown to around Rs 59,139 (CAGR of 18%) as on December 11, 2012. A similar investment in the benchmark and S&P CNX Nifty would have grown to Rs 31,973 (CAGR 11.5%) and Rs 53,509 (CAGR 17%), respectively.

Balanced

HDFC Balanced Fund 2.49 8.01 11.55 17.81 13.43 16.18 11-Sep-00 784.32 11.45 0.05

ICICI Prudential Balanced Fund 4.78 10.67 15.91 22.22 11.86 13.85 3-Nov-99 344.23 11.41 0.42

MIP Aggressive

HDFC Monthly Income Plan - LTP 1.02 4.68 7.21 12.44 7.82 11.20 26-Dec-03 5382.54 4.25 -0.13

Reliance Monthly Income Plan 1.62 4.61 7.16 15.67 8.15 10.87 13-Jan-04 3423.37 3.72 0.31

MIP Conservative

Birla Sun Life MIP II - Savings 5 Plan 0.99 3.05 6.17 11.36 7.82 8.76 22-May-04 309.81 1.53 1.08

CRISIL Fund Rank 1 Schemes - Hybrid

Scheme Name1

Month3

Month6

Months1

Years

Since Inception

InceptionDate

Point to Point Returns %Average

AUM (Rs.Crore)

3Years

Mutual Funds' Performance Report

StyleBox

Std.Deviation

(%)SharpeRatio

(Style Box Legend for Balanced Schemes) (Style Box Legend for MIP Aggressive and Conservative Schemes)

Large cap

Small & Midcap

Value Blend Growth

Diversified

CRISIL Mutual Fund Ranks as of September 2012

Point to Point Returns are as on Nov 30, 2012

Returns are annualised for periods above 1-year, other wise actualised

Risk Period for Risk Ratios is two years

For Sharpe Ratio the risk free rate is 8.14% - the average 91-day T-Bill auction cut-off rate for two years

Average AUM is 3-months average number as disclosed by AMFI for the period July-September 2012

Chart 1: Annualised Returns

Asset Allocation

Portfolio Analysis

Fund Managers

Over the past three years, the fund has maintained its average equity exposure at 69%, debt exposure at 30% and the rest is in cash and cash equivalents.

Over the past three years, the top five sectors (banks, finance, software, auto ancillaries and consumer non-durables) have constituted 60% of the equity portfolio, while the category’s exposure to the same sectors has been 47%. During the same period, the representative indices for these sectors – CNX Bank, CNX IT Sector Index, BSE Auto and CNX FMCG – gave annualised returns of 10.7%, 2.3%, 14.8% and 29%, respectively, against 4.9% annualised returns by the S&P CNX Nifty.

On the debt side, the fund has actively managed its duration (portfolio maturity) or interest rate risk as well as maintained the portfolio liquidity in the three-year period. On the asset quality parameter, the fund has higher allocation to good credit quality papers. The average three-year exposure to G-Secs and highest rated papers (AAA/P1+) has been around 55% of its debt portfolio.

Mr Yogesh Bhatt and Mr Avnish Jain, senior fund managers, manage the equity and debt portfolios, respectively, of the Fund.

High Medium Low

High

Medium Low

INTEREST RATE SENSITIVITY

An

nu

alis

ed

Re

turn

s (

%)

1 Year 3 Years 5 Years 7 Years 10 years-5

5

15

25 Performance as on December 11, 2012

Category Average

S&P CNX Nifty

CRISIL BalanceEX

ICICI Prudential Balanced Fund

Table 1: SIP Returns (as on December 11, 2012)

Period

1-Year SIP

3-Years SIP

5-Years SIP

7-Years SIP

10-Years SIP

ICICI Prudential Balanced Fund

CRISIL BalanceEX S&P CNX NIFTY

Total Amount

Invested(Rs)

12,000.00

36,000.00

60,000.00

84,000.00

120,000.00

Market

Value(Rs)

13,480.21

43,259.32

83,726.81

123,464.65

255,326.21

SIP

Returns(%)

26.34

12.72

13.55

10.96

14.57

Market

Value(Rs)

13,080.70

40,047.02

74,785.06

113,489.70

216,105.88

SIP

Returns(%)

19.04

7.28

8.92

8.57

11.42

Market

Value(Rs)

13,384.94

39,588.13

75,121.11

112,695.28

246,441.59

SIP

Returns(%)

24.58

6.48

9.10

8.37

13.90

1. What fund performance evaluation criteria should investors look at before investing in mutual funds?

2. What are the quantitative factors for choosing a mutual fund scheme?

3. What ratios can investors use to analyse the risks?

4. What are the other ratios that investors can look at while judging performance?

Mutual funds have gained popularity as an investment option in recent years due to their inherent features of liquidity, professional management and low costs. They also cater to all risk profiles and investment objectives of retail investors. However, despite several benefits and plethora of choices, retail investors often find it difficult to choose the appropriate fund. Investors can look at two primary factors before choosing a mutual fund - qualitative and quantitative. The former deals with the quality of service provided by the mutual fund house while the latter deals with the performance of the mutual fund scheme.

Returns, especially over the long term, are the biggest factor for choosing a mutual fund scheme. However, they should not be the only deciding factor. There are various other ratios that the investor can check to determine the risk associated with a mutual fund scheme. In investment parlance, risk is defined as the probability that actual returns on an investment will be lower than the expected returns. Risk leads to the possibility of losing some or all of the original investment.

Apart from the risks and returns, investors must look at the costs involved while investing in mutual funds. Though these costs are a small component, they can knock down investors' earnings especially if a scheme does not perform well. Hence, investors are advised to carefully evaluate the charges they have to pay while purchasing and selling mutual fund units. One of the ratios used to analyse the costs is the Total Expense Ratio (TER).

TER is an annual charge on AUM in percentage terms and is calculated as (total expenses during an accounting period) * 100 / total net assets of the fund. The ratio includes investment management and advisory fees, sales/agent commissions and ongoing service fees, legal and audit fees, registrar and transfer agent fees, fund administration expenses, and marketing and selling expenses. The net asset value (NAV) of a mutual fund scheme is net of all liabilities including TER and, hence, a lower TER results in higher returns and vice versa. Investors must invest in a scheme which charges a lower TER compared to peers as higher expenses reduce returns of the fund.

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Last updated: April 30, 2012

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Disclaimer

About CRISIL LimitedCRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

About CRISIL ResearchCRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and analysis on

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Ratios used in analysing mutual fundsFrequentlyAskedQuestions

Ratio Meaning

Standard Deviation

Ratios from the investor perspective*

It implies how much returns on a fund are deviating from the average returns based on its historical performance. Standard Deviation helps in finding out the degree to which the fund fluctuates in relation to the average returns of a fund over a period of time. It will give an idea about the consistency of a fund's returns.

Lower the better

Lower the better

Higher the better

Beta It measures the volatility of a particular fund in comparison to the market as a whole. It will indicate how sensitive the returns of the fund are to the fluctuation in the market. A beta of 1 shows that the fund's NAV is closely aligned with that of the market. A beta of less than 1 implies the fund's NAV will be less volatile than the benchmark index and vice versa if the beta is more than one.

Sharpe Ratio (S.R.)This ratio measures the risk-adjusted performance for each unit of dispersion measured by Standard Deviation. Higher Sharpe Ratio shows superior risk-adjusted performance of a fund, i.e. fund has generated higher returns for every unit of risk taken.

Higher the betterTreynor Ratio (T.R.)A variant of the Sharpe Ratio, this measures the risk-adjusted performance for each unit of dispersion measured by beta (i.e. market risk). This ratio is similar to the Sharpe Ratio, only it uses beta as the volatility measurement. The ratio divides the difference of the average return of a fund and the risk-free rate by beta (market risk) of the fund.

Higher the betterJensen's Alpha (a)aThe excess or abnormal returns earned by the mutual fund portfolio compared to its benchmark. A positive alpha on the investment implies that the fund has performed better than expected, given its beta. A negative alpha indicates that the fund has underperformed.

Higher the betterR-squaredThis term is used to gauge the correlation between the mutual fund scheme and the benchmark index measured in the range of 0 to 100. R-squared of 100 means that the mutual fund moves in tandem with the benchmark index and R-squared of 0 means least correlation.

Lower the better Portfolio Turnover Rate

Number of times or the rate at which portfolio securities are changed in a year. If the fund size is Rs 1,000 crore and it has bought or sold securities worth Rs 1,000 crore then the Turnover Rate is 100%. Higher ratio may lead to higher expenses. However, a low ratio would not necessarily be a good indicator as a low ratio may indicate that fund manager is not churning portfolio as per the changing market conditions.

Lower the better Average maturity Pure debt and hybrid mutual funds have different types of fixed income instruments in their portfolio with each of them having a maturity date. Average maturity refers to the average of the maturities of the entire debt instrument in the portfolio of the fund. Average maturity will give an idea about how sensitive the debt fund is to the changes in the interest rate. Fixed income instruments with longer maturity are more volatile than those with shorter maturity.

* Investors Risk Perspective