Why have mutual funds in India performed so poorly?
Most investors associate mutual funds with Master gain, Monthly Equity Plans of SBI Mutual Fund, UTI and Canbank Mutual Fund and of course Morgan Stanley Growth Fund. This is so because these funds truly had participation from masses, with a fund like Morgan Stanley having more than 1 million investors. Investors feel that after 5 years, Morgan Stanley Growth Fund units still trade below the original IPO price of Rs.10. It is incorrect to think that all mutual funds have performed poorly. If one looks at some income funds, they have come with reasonable returns. It is only the performance of equity funds, which has been poor. Their poor performance has been amplified by the closed end discounts ie units of these funds quoting at sharp discounts to their NAV resulting in an even poorer return to the investor. One must remember that a Mutual Fund does not provide assured returns and neither can it “manufacture” returns out of thin air. Returns provided by mutual funds are a function of t
