7 Mutual Funds That Turned Out to be the Top Performing Schemes on 10-year Rolling Returns Basis

October 27, 2023 Mutual Fund

Comparing mutual funds based on their past performance is one of the key aspects of shortlisting schemes for your investment portfolio. Most individuals generally consider point-to-point returns to analyse schemes within a particular category. However, rolling returns are a more useful way to determine the past performance of mutual funds.

In the last 10 years, 23 diversified equity mutual funds generated a CAGR of 20% or more based on rolling returns. Most of these schemes belonged to the Small Cap Fund and Large & Midcap Fund category. The top-performing mutual fund generated a CAGR of about 28% during this period.

In this article, we will delve into the top performing mutual fund schemes with highest 10-year rolling returns.

But first, let us first understand what are rolling returns…

What are rolling returns in mutual funds?

Rolling returns are the average annualised returns of mutual fund schemes over specific periods such as 1 year, 3 years, 5 years, 10 years, etc. In other words, a rolling return takes the average of all return points for the chosen period.

Rolling returns take into account the point-to-point returns for the length of time for which the investors want to analyse the returns (3 years, 5 years, 10 years, etc.) and roll it over a return cycle (such as 1 year), at a specific frequency (daily, weekly, monthly, etc.).

For instance, a 3-year rolling return will consider 3-year compounded annualised return (CAGR) on a daily frequency for the last 1 year. This means that to calculate the 3 year rolling returns as of October 20, 2023, returns will be rolled every day for a 1 year period i.e. from October 20, 2020 to October 20, 2023, October 19, 2020 to October 19, 2023, October 18, 2020 to October 18, 2023 (or the previous trading day in the case of weekend/holiday), and so on, till it covers around 250 trading days in the last 1 year period.

How rolling return works…

The securities quoted are for illustration only and are not recommendatory.
Data as of October 20, 2023; Direct plan – Growth option considered
Past performance is not indicative of future returns
(Source: ACE MF, data collated by PersonalFN) 

The above exercise will help derive the mean of the data series, i.e. the average of all return points for the chosen period. In the above example, it will be the average returns of three years. The higher the average, the better the fund has performed.

[Read: All You Need to Know About the Rolling Returns of Mutual Funds]

Why look at rolling returns instead of point-to-point returns?

As the name suggests, the point-to-point return shows the change in NAV from one point (start date) to another point (end date). When analysing mutual funds, point-to-point returns may not be the best way forward because they just show the performance for the respective point in time and not over the period of time.

You see, markets go through various phases and cycles, which one cannot ignore while determining the performance of a mutual fund scheme. In the case of point-to-point returns, the performance may be influenced by certain key events that may have taken place during the beginning or end date of the period under review.

For instance, let’s assume that an investment in a mutual fund scheme was made five years ago, i.e., on October 20, 2018. Between then and now, the scheme NAV has more than doubled. But for the first two and half years, it generated lacklustre returns. In other words, the bulk of returns has come in the last two and a half years. Computing the point-to-point returns won’t give you any clue about the uneven track record of the scheme due to the recency bias.

Point-to-point returns do not tell you how consistently the scheme has performed over this period. On the other hand, the rolling return irons out the distortions and provides smoothed returns over the period chosen. Thus, it is a better means of assessing the returns for the mutual fund investor over the holding period.

Let us now move on to the list of 7 equity mutual funds that turned out to be top-performing schemes on a 10-year rolling returns basis:

Top-performing mutual funds with the highest 10-year rolling returns

The securities quoted are for illustration only and are not recommendatory.
Selected on the basis of 10-year Rolling Returns as of October 20, 2023; Direct plan – Growth option considered
Past performance is not indicative of future returns
(Source: ACE MF, data collated by PersonalFN) 

#1 Nippon India Small Cap Fund – Small Cap Mutual Fund

Launched in September 2010, Nippon India Small Cap Fund currently has an AUM of Rs 37,374 crore, making it the largest scheme in the Small Cap Fund category.

The fund uses diversification as a risk-mitigation technique and holds a large portfolio of over 150 stocks spread across sectors.

In the last 10 years, Nippon India Small Cap Fund grew at a CAGR of 28% based on rolling returns.

The fund’s top stock holdings include Tube Investments of India, HDFC Bank, Apar Industries, KPIT Technologies, and Tejas Networks.

Click here to read PersonalFN’s analysis on Nippon India Small Cap Fund.

#2 SBI Small Cap Fund – Small Cap Mutual Fund

Launched in September 2009, SBI Small Cap Fund currently has an AUM of Rs 21,320 crore and it is one of the most popular schemes in the category.

The fund has well established itself in the Small Cap Fund category due to its commendable long-term track record, wherein it stands among the top quartile performers.

In the last 10 years, SBI Small Cap Fund grew at a CAGR of 26.8% based on rolling returns.

The fund’s top stock holdings include Blue Star, SBFC Finance, Carborundum Universal, Lemon Tree Hotels, and Kapataru Projects International.

Click here to read PersonalFN’s analysis on SBI Small Cap Fund.

#3 DSP Small Cap Fund – Small Cap Mutual Fund

Launched in June 2007, DSP Small Cap Fund currently has an AUM of Rs 12,098 crore.

The fund avoids taking undue risk and prefers to buy-and-hold stocks with a long-term view which has worked well in its favour over the long run.

In the last 10 years, DSP Small Cap Fund grew at a CAGR of 24% based on rolling returns.

The fund’s top stock holdings include Cyient, Triveni Engineering & Industries, Suprajit Engineering, Ratnamani Metals & Tubes, and Ipca Laboratories.

#4 Mirae Asset Emerging Bluechip Fund – Large & Midcap Mutual Fund

Launched in July 2010, Mirae Asset Emerging Bluechip Fund currently has an AUM of Rs 29,024 crore, making it the largest and most popular scheme in the Large & Midcap Mutual Fund category.

The fund has registered a commendable track record since its inception and has been successful in delivering superior returns over the long run.

In the last 10 years, Mirae Asset Emerging Bluechip Fund grew at a CAGR of 23.9% based on rolling returns.

The fund’s top stock holdings include HDFC Bank, ICICI Bank, SBI, Axis Bank, and Reliance Industries.

Click here to read PersonalFN’s analysis on Mirae Asset Emerging Bluechip Fund.

#5 Canara Rob Emerging Equities Fund – Large & Midcap Mutual Fund

Launched in March 2005, Canara Robeco Emerging Equities Fund currently has an AUM of Rs 18,063 crore.

The fund has frequently secured its position among the top quartile performers and even surpassed its benchmark over longer time periods.

In the last 10 years, Canara Robeco Emerging Equities Fund grew at a CAGR of 22.5% based on rolling returns.

The fund’s top stock holdings include ICICI Bank, HDFC Bank, Cholamandalam Investment and Finance Company, Reliance Industries, and Bharat Electronics.

Click here to read PersonalFN’s analysis on Canara Robeco Emerging Equities Fund.

#6 Kotak Emerging Equity Fund – Mid Cap Mutual Fund

Launched in March 2007, Kotak Emerging Equity Fund currently has an AUM of Rs 33,918 crore, making it one of the largest schemes in the Mid Cap Mutual Fund category.

The fund has exhibited consistency in terms of performance and holds a noteworthy track record of generating market-beating returns across most time periods.

In the last 10 years, Kotak Emerging Equity Fund grew at a CAGR of 22.4% based on rolling returns.

The fund’s top stock holdings include Supreme Industries, Schaeffler India, Persistent Systems, Cummins India, and Solar Industries India.

Click here to read PersonalFN’s analysis on Kotak Emerging Equity Fund.

#7 Kotak Small Cap Fund – Small Cap Mutual Fund

Launched in February 2005, Kotak Small Cap Fund currently has an AUM of Rs 12,440 crore.

The fund holds an impressive track record of generating market-beating returns over the long term.

In the last 10 years, Kotak Small Cap Fund grew at a CAGR of 22.4% based on rolling returns.

The fund’s top stock holdings include Cyient, Carborundum Universal, Century Plyboards, Ratnamani Metals & Tubes, and Blue Star.

To conclude…

It is important to note that the past performance of mutual funds may or may not sustain in the future. Therefore, when shortlisting schemes for the portfolio one should undertake a holistic assessment of schemes based on various quantitative and qualitative parameters.

Mutual fund investments should always be made as per one’s financial objective, risk appetite, and investment horizon. If you are unsure which type of mutual fund is suitable for your investment needs, it is better to consult a SEBI-registered investment adviser.

Related links:

What is XIRR in Mutual Funds? And How to Calculate it?

CAGR in Mutual Funds: What It Is, How to Calculate It, and Why It Matters

7 Best Mutual Funds to Invest in 2023 – Top Performing Mutual Funds in India

Want to Invest in Small cap Funds? Manage the Risk and Reward Well

Diversification in Mutual Fund Portfolio-The Secret to Long-Term Investing Success

Note: This write-up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.

This article first appeared on PersonalFN here