GIVE HIGHER WEIGHT TO LONGER-TERM RETURNS
Pension fund manager RETURNS (%) 1-year 3-year 5-year
UTI Retirement Solutions Kotak Pension 15.76 SBI Pension 13.26 ICICI Pru Pension 13.38 Reliance Capital Pension HDFC Pension LIC Pension
13.77 14.32 16.93 13.11 10.49 10.89
9.38 10.76 8.97 14.31 14.2 13.58 13.47 13.33
job of containing downsside risk in a declining market. So, chasing yesterday's best performer may not be a very wise idea. “If a fund manager has filled his portfolio with high-beta stocks, he may do well amid momentum but will perform poorly in a market that is conducive to low-beta stocks,” says Anil Rego, chief executive officer, Right Horizons, a Bengaluru-based financial planning firm. He suggests that investors should give higher priority to a PFM whose performance has been stable across various time horizons. Such a PFM is also likely to have taken less risk.
Investors should also give higher weight to longer-term returns. “One fund manager may have given a return of 20 per cent over the past one year while another may have given a 15 per cent compounded annual return over five years. Prefer the latter. Maintaining good return over five years is a far tougher job than being top performer for a year,” says Rego.
Investors who have already invested with a PFM should not shift just because their fund has underperformed another by a small margin. Only if the funds managed by a PFM consistently underperform their benchmark should a shift be considered.
For most investors, returns of the equity fund will be important when they are younger while debt funds will become more important as they approach retirement. Finally, review the performance of your PFM once at least every couple of years and switch if he has been a laggard.