Mutual Fund Research Process
Process Overview
Step 1 - AMC Evaluation
• Sponsor credibility
• Investment team
experience, strength and
continuity
• Investment process
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Step 2 – Fund Elimination
Criteria within each
category
• History of less than 3 years
• AUM of less than INR 500
cr
• AMCs which have asset
class AUM below median
AUM
Step 3 - Fund Evaluation
(Quarterly basis)
• Returns vs Peers
• Consistency of returns
• Risk
• Current positioning
Step 4 – Recommended
& Focus Funds
• Top 3 fund
recommendation across
equity, fixed income and
hybrid categories
• Focus Funds - Shortlist of
select funds based on
market outlook and fund
rating.
Pillars of Fund Selection – Equity & Hybrid

Pillar Parameters Used Weight

Median of 1 Year, 1 Month and 1-week daily rolling return over

Return 50%
the past 3 years
Daily observations of the 1 year daily rolling return for each fund
Consistency of
is compared to the category median to arrive at consistency 30%
Alpha
score over the past 3 years

Risk Down capture ratio of monthly returns vs broad indices 20%

In addition to this, various parameters for equity funds like fund manager track record, market cap split, expense ratio, portfolio
diversification etc are also looked at as checks and balances.

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 Pillars of Fund Selection – Fixed Income

Pillar Parameters Used Weight

Median of 1 Year, 6 Month and 1 Month daily rolling return over

Return 25%
the past 3 years
Daily observations of the 1 year daily rolling return for each fund
Consistency of
is compared to the category median to arrive at consistency 25%
Alpha
score over the past 3 years

Net YTM Gross YTM minus expense ratio 25%

Credit Rating Assets in the A1+, AAA, Sovereign and Cash bucket 25%

In addition to this, various parameters for fixed income fund are tracked. They include Duration, Maturity, Fund flows, portfolio, credit
quality split etc.

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Fund Rating Scale
Fund Rating Definition

Top 15 percentile in the category 1

15 to 35 percentile in the category 2

35 to 60 percentile in the category 3

60 to 90 percentile in the category 4

Bottom 10 percentile in the category 5

Funds with History < 3 years or AUM <500 cr Not Rated (NR)

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Review Process

• Review is done on a quarterly basis.

• New additions in a particular category can be from rank 1 and 2 funds only
• If a recommended fund maintains its rating from 1 to 3, then the fund remains in the recommended list of the quarter.
• If a fund slips to 4 or below, the fund is then put on hold.
• Consistent rating of 4 or below for 3 quarters result in fund going out of the recommended list.
• In case of a temporary slip to below 3 followed by a performance uptick in the next quarter, the fund will again qualify
as a recommended fund.

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Disclaimer
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Thank You