Glossary
SCHEME CLASSIFICATION:
Equity Schemes:
Multi Cap Fund: An open ended equity scheme investing
across large cap, mid cap, small cap stocks, Minimum
investment in equity & equity related instruments 65% of total
assets
Large Cap Fund: An open ended equity scheme
predominantly investing in large cap stocks, Minimum
investment in equity & equity related instruments of large cap
companies 80% of total assets
Large & Mid Cap Fund: An open ended equity scheme
investing in both large cap and mid cap stocks, Minimum
investment in equity & equity related instruments of large cap
companies 35% of total assets & mid cap companies 35% of
total assets
Mid Cap Fund: An open ended equity scheme predominantly
investing in mid cap stocks, Minimum investment in equity &
equity related instruments of mid cap companies 65% of total
assets
Small cap Fund: An open ended equity scheme
predominantly investing in small cap stocks, Minimum
investment in equity & equity related instruments of small cap
companies 65% of total assets
Dividend Yield Fund: An open ended equity scheme
predominantly investing in dividend yielding stocks, Minimum
investment in equity 65% of total assets
Value Fund: An open ended equity scheme following a value
investment strategy, Minimum investment in equity & equity
related instruments 65% of total assets
Contra Fund: An open ended equity scheme following
contrarian investment strategy, Minimum investment in equity &
equity related instruments 65% of total assets
Focused Fund: An open ended equity scheme investing in
maximum 30 stocks (where the scheme intends to focus, multi
cap, large cap, mid cap, small cap), Minimum investment in
equity & equity related instruments 65% of total assets
ELSS: An open ended equity linked saving scheme with a
statutory lock in of 3 years and tax benefit, Minimum
investment in equity & equity related instruments 80% of total
assets.
Ultra Short Duration Fund: Investment in Debt & Money
Market instruments such that the Macaulay duration of the
portfolio is between 3 – 6 months
Low Duration Fund: Investment in Debt & Money Market
instruments such that the Macaulay duration of the portfolio is
between 6 – 12 months
Money Market Fund: Investment in Money Market instruments
having maturity upto 1 year
Short Duration Fund: Investment in Debt & Money Market
instruments such that the Macaulay duration of the portfolio is
between 1 – 3 years
Medium Duration Fund: Investment in Debt & Money Market
instruments such that the Macaulay duration of the portfolio is
between 3 – 4 years
Medium to Long Duration Fund: Investment in Debt & Money
Market instruments such that the Macaulay duration of the
portfolio is between 4 – 7 years
Long Duration Fund: Investment in Debt & Money Market
Instruments such that the Macaulay duration of the portfolio is
greater than 7 years
Dynamic Bond Fund: Investment across duration
Corporate Bond Fund: Minimum investment in corporate
bonds 80% of total assets (only in highest rated instruments)
Credit Risk Fund: Minimum investment in corporate bonds
65% of total assets (investment in below highest rated
instruments)
Banking and PSU Fund: Minimum investment in Debt
instruments of banks, Public Sector Undertakings, Public
Financial Institutions 80% of total assets
Gilt Fund: Minimum investment in Gsecs 80% of total assets
(across maturity)
Gilt Fund with 10 year constant duration: Minimum
investment in Gsecs 80% of total assets such that the
Macaulay duration of the portfolio is equal to 10 years
Floater Fund: Minimum investment in floating rate instruments
65% of total assets.
Macaulay Duration: It is the weighted average term to maturity
of the cash flows from an instrument. The weight of each cash
flow is determined by dividing the present value of the cash flow
by the price. Macaulay duration is a measure of interest rate
sensitivity of a Fixed income instrument. Higher the Macaulay
duration, higher would be the interest rate risk.
Sectoral/ Thematic: An open ended equity scheme investing
in Sector / Theme, Minimum investment in equity & equity
related instruments of a particular sector / particular theme
80% of total assets
Debt Schemes:
Overnight Fund: Investment in overnight securities having
maturity of 1 day
Liquid Fund: Investment in Debt and money market securities
with maturity of upto 91 days only
Aggressive Hybrid Fund: An open ended hybrid scheme
investing predominantly in equity and equity related
instruments, Equity & Equity related instruments between 65%
and 80% of total assets; Debt instruments between 20% 35%
of total assets
Dynamic Asset Allocation or Balanced Advantage: An open
ended dynamic asset allocation fund, Investment in equity /
debt that is managed dynamically
Multi Asset Allocation: An open ended scheme investing in
three different asset classes with a minimum allocation of at
least 10% each in all three asset classes
Arbitrage Fund: An open ended scheme investing in arbitrage
opportunities. Minimum investment in equity & equity related
instruments 65% of total assets
Equity Savings: An open ended scheme investing in equity,
arbitrage & debt, Minimum investment in equity & equity related
instruments 65% of total assets & debt 10% of total assets
Hybrid Schemes:
Conservative Hybrid Fund: An open ended hybrid scheme
investing predominantly in debt instruments, Investment in
equity & equity related instruments between 10% and 25% of
total assets; Debt instruments between 75% and 90% of total
assets
Solution Oriented Schemes :
Retirement Fund: An open ended retirement solution oriented
scheme having a lock-in of 5 years or till retirement age (whichever
is earlier)
Children’s Fund: An open ended fund for investment for
children having a lock-in for at least 5 years
Other Schemes:
Index Funds/ ETFs: Minimum investment in securities of a
particular index (which is being replicated / tracked) 95% of
total assets
FoFs (Overseas/ Domestic): An open ended fund of fund
scheme. Minimum investment in the underlying fund 95% of
total assets
How To Read Fund Performance Scorecard
Rank: Higher the return, Higher the rank, i.e. scheme with the
highest return will have the first rank. If a scheme has higher
ranks (Rank 1 or 2) in all the given periods, then that scheme is
considered to be a good performing as well as consistent
scheme.
Quartile: Performance for the period is differentiated in four
quartiles. First quartile represents best performing schemes
(top 25% schemes), while last or fourth quartile represents
relatively worst performing schemes for the period. If a
scheme remains in first or second quartile for all the given
periods, then the performance of the scheme is considered
as consistent & above average. For further filteration, risk
ratio should be considered.
Standard Deviation: Standard Deviation is absolute measure
of volatility. It suggests the deviation of returns from its mean.
Beta: It is the measure of the volatility of a security or a
portfolio as compared to the market as a whole. Beta signifies
the risk or volatility relative to the Benchmark Indices. By
definition, benchmark index holds Beta of 1. For example – If a
fund’s Beta is 1.2, it simply means that the fund is 1.2 times
more volatile than the benchmark index.
Sharpe Ratio: The Sharpe ratio, also known as Reward to Risk
Ratio, measures the risk-adjusted performance. It indicates the
excess return per unit of risk associated with the excess return.
Diversification – A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated (ideally perfectly negatively correlated).
To calculate Sharpe ratio, risk free rate is subtracted from
portfolio returns and dividing the result by the standard
deviation of the portfolio returns. The higher the Sharpe
Ratio, the better the performance. A negative Sharpe
indicates that a rational investor would choose risk-less asset
over the risky investment under analysis.
Treynor Ratio: The Treynor ratio, also known as the Reward to
Volatility ratio, measures returns earned in excess of that which
could have been earned on a risk-less investment per each unit
of market risk. To calculate Treynor ratio, risk free rate is
subtracted from portfolio returns and dividing the result by the
Beta of the portfolio returns. Treynor ratio is a risk-adjusted
measure of return based on systematic risk. It is similar to the
Sharpe ratio, but the Treynor ratio uses beta as the
measurement of volatility whereas Sharpe ratio uses Standard
Deviation. The higher Treynor Ratio score means better the
fund.
Alpha: The excess return of the fund relative to the return of the
benchmark index is a fund’s alpha. Alpha is the actual return in
excess to what was predicted using the CAPM model. Alpha is
often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return. The higher Alpha score means better the fund.
Risk Adjusted Returns – We should know that how much risk is involved in producing an investment’s return. The return generated in excess of risk is known as Risk Adjusted Return and is generally expressed as a number or rating. Risk-adjusted returns are applied to individual securities and investment funds and portfolios. There are five principal risk measures: Alpha, Beta, R-squared, Standard Deviation and the Sharpe ratio. Each risk measure is unique in how it measures risk.
