Finding Winners

As I was writing the previous post, a thought occurred, how are the top 4 Large-cap funds for the past 10 years doing in the past 5 years, Lets look at the top 4 for the last 5 years.

Kotak Select Focus Growth						19.42
Mirae Asset India Opportunities Fund Regular Growth						18.49
SBI Bluechip Fund Regular Growth						18.41
DSP BlackRock Opportunities Fund Growth						17.84

The first 2 funds didn't exist 10 years back, the performance of the 10 year toppers over the past 5 years is below

Birla Sun Life Frontline Equity Fund Growth			16.96
HDFC Top 200 Fund Growth			13.54
HDFC Equity Fund Growth			14.64
Uti Prim Opp Growth			12.05

Looks highly likely that the top 4 for a 10 year period would be completely different from the 4 topper today - who are you going to bet on, let me know :)

Now the toppers for the past 3 years, none of them existed 5 years back except for the Kotak Select ..

JM Multi Strategy Fund (Direct) - Growth Option		27.7
Kotak Select Focus Fund - Growth - Direct		27.66
JM Core 11 Fund (Direct) - Growth Option		27.01
ICICI Prudential Nifty Next 50 Index Fund Direct Plan Growth		26.83

The Kotak Select Focus Fund appears in both the 3 year and 5 year tables, lets see what its allocation looks  like. stocks & percentages look familar :-)

HDFC Bank Ltd		6.15
Reliance Industries Ltd		4.14
ITC Ltd		4.11
UltraTech Cement Ltd		3.77
Hero MotoCorp Ltd		3.85
		22.02

There is an index fund in the top 3, which is interesting.

Giant	7.04
Large	89.66
Medium	0
Small	3.3

This fund has a turnover of 101% according to Morningstar, does this imply its performance is random ?

We can also look at the performance of the 10 year toppers for the past 3 years, compare with 27% for the top 4.

Birla Sun Life Frontline Equity Fund Growth			20.85
Uti Prim Opp Growth			15.5
HDFC Top 200			20.04
HDFC Top 200			21.44

But if you look at the 80/20 Nifty/BSE Midcap , the 3 year performance lines up. but I am not sure if that's just chance, since the current asset allocation matches the 3 funds, it could be correlation, but I dont know the asset allocations of these funds over the last 3 years.

Number of Years	CAGR
11	24.032858
10	22.57338636
9	18.7843656
8	22.98029533
7	15.39238738
6	14.42460644
5	19.12184187
4	15.95908689
3	20.81033645
2	11.11579405
1	12.7407458

The moral is finding winners is hard. What is the common investor do do - investing in the Nifty Index doesn't cut it, Use an advisor with the right crystall ball ?