review of literature mutual funds

Review of Literature

• First Online: 13 November 2016

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• G. V. Satya Sekhar MBA,Ph.D 2  

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The fundamental aim of this chapter is to understand the management of mutual funds in the following areas:

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Investment Company Institute, Global Corporate Governance Issues for Mutual Funds’, 2000.

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Eun, C.S., R. Kolodny and B.G. Resnick (1991), “U.S. Based International Mutual Funds: A Performance Evaluation,” The Journal of Portfolio Management 17, Spring, 88–94.

Bruce A Costa, Keith Jakob, Scott J Niblock and Elisabeth Sinnewe (2015), ‘Benchmarking’ the benchmarks: How do risk-adjusted returns of Australian mutual funds and indexes measure up?, Journal of Asset Management 16, pp. 386–400 , doi:10.1057/jam.2015.29.

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Massimo Massa and Lee Xhang (2008), ‘The Effects of Organizational Structure on Asset Management, http://ssrn.com/abstract=1328189 .

Manuel Ammann and Michael Verhofen (2008), ‘The Impact of Prior Performance on the Risk-Taking of Mutual Fund Manager’. Annals of Finance, Issue 5, pp. 69–90.

David M Smith (2009), ‘The Economics of Mutual Funds’, Chapter-3 of forthcoming in John A Haslem (ed.) ‘A Companion to Mutual Funds’, John Wiley Sons, USA.

Lalik K Bansal (1997), “Mutual Fund- Management and Working’, Deep & Deep Publishers, New Delhi.

Diane Del Guercio and Paula A. Tkac (2000), The Determinants of the Flow of Funds of Managed Portfolios: Mutual Funds versus Pension Funds, Federal Reserve Bank of Atlanta Working Paper 2000–21 November.

Zhao, Yonggan, A Dynamic Model of Active Portfolio Management and Mutual Fund Performance Evaluation (March 2005). Available at SSRN: http://ssrn.com/abstract=685683 or http://dx.doi.org/10.2139/ssrn.685683 .

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Yoon K Choi, (2006) Relative Portfolio Performance Evaluation and Incentive Structure, Journal of Business, Vol. 79, No. 2, pp. 903–21.

Eleni Thanou (2008), “Mutual Fund Evaluation During Up and Down Market Conditions: The Case of Greek Equity Mutual Funds”, International Research Journal of Finance and Economics, Issue 13.

Mohit Gupta and Navdeep Aggarwal (2009), ‘Mutual Fund Portfolio Creation using Industry Concentration’, The ICFAI Journal of Management Research, Vol. Viii, No. 3, 2009, pp. 7–20.

Sandra Ramirez, Jesus Sierra Jimenez and Jonathan Witmer(2015), Canadian Open-End Mutual Funds: An Assessment of Potential Vulnerabilities, Bank of Canada, Financial system review, June pp. 47–55

Friend, I., F.E. Brown, E.S. Herman and D. Vickers (1962), A Study of Mutual Funds, U.S. Government Printing Office, Washington, D.C.

Sharpe, William F (1964), “Capital Asset Prices: A Theory of Market Equilibrium under conditions of Risk’, Journal of Finance, 19: Sept, pp. 225–42.

Treynor Jack L (1965), “How to rate management of investment funds?’, Harvard Business Review, Vol. 43, pp. 63–75.

Treynor Jack L and Mazuy, Kay K (1966), “Can Mutual Funds Outguess the Markets”, Harvard Business Review, 44: 131–36.

Michel C Jensen (1967), “The Performance of Mutual Funds in the Period 1945–64”, Journal of Finance, Vol. No. 23, No. 2, pp. 389–416.

Born Karn Eric (1983), ‘International Banking in the 19th and 20th Centuries, New York: St. Martin’s Press.

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Eun, C.S., R. Kolodny and B.G. Resnick (1991), “U.S. Based International Mutual Funds: A Performance Evaluation,” The Journal of Portfolio Management 17, Spring, pp. 88–94.

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Droms, W.G. and D.A. Walker, “Investment Performance of International Mutual Funds,” Journal of Financial Research 17, Spring 1994, pp. 1–14.

Volkman, D. A., &Wohar, M. E. (1995), “Determinants of Persistence in Relative Performance of Mutual Funds”, Journal of Financial Research, 18, pp. 415–30.

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Carhart, M. M. (1997), “Persistence in Mutual Fund Performance,” Journal of Finance, 52, pp. 57–82.

Jow-Ran Chang, Mao-Wei Hung & Cheng-few Lee (2003), “An Intertemporal CAPM approach to Evaluate Mutual Fund Performance”, Review of Quantitative Finance and Accounting, 20, pp. 425–33.

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Ramesh Chander (2006), “Informational Efficiency, Parameter Stationarity and Bench Mark Consistency of Investment Performance, The ICFAI Journal of Applied Finance, March.

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Manuel Ammann and Michael Verhofen (2008), ‘The Impact of Prior Performance on the Risk-Taking of Mutual Fund Manager’ Annals of Finance, Issue 5, pp. 69–90.

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Massimo Massa and Lee Xhang (2008) “The Effects of Organizational Structure on Asset Management”, http://ssrn.com/abstract=1328189

Ammann, M. and Verhofen, M. (2008) “The Impact of Prior Performance on the Risk-Taking of Mutual Fund Manager”, Annals of Finance, No 5, pp. 69–90.

Smith, D.M. (2009) “The Economics of Mutual Funds”, Chapter-3 of forthcoming in John A Haslem (ed.) ‘A Companion to Mutual Funds’, John Wiley Sons, USA.

Choi, Y.K. (2006) “Relative Portfolio Performance Evaluation and Incentive Structure”, Journal of Business, Vol. 79, No. 2, pp. 903–21.

Gupta, M. and Aggarwal, N. (2009) “Mutual Fund Portfolio Creation Using Industry Concentration”, The ICFAI Journal of Management Research, Vol. Viii, No. 3, pp. 7–20.

Sharpe, William F. (1964) “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk”, Journal of Finance, 19: Sept, pp. 225–242.

Treynor, J.L (1965) “ How to Rate Management of Investment Funds”, Harvard Business Review, Vol. 43, pp. 63–75.

Treynor, J.L. and Mazuy, K.K. (1966) “Can Mutual Funds Outguess the Makrets”, Harvard Business Review, Vol. 44, pp. 131–136.

Jensen, M.C. (1967) “The Performance of Mutual Funds in the Period 1945–64”, Journal of Finance, Vol. 23, No. 2, pp. 389–416.

Fama, E.F. (1972) “Components of Investment Performance”, Journal of Finance, Vol. 27, pp. 551–567.

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Sekhar, G.V.S. (2017). Review of Literature. In: The Management of Mutual Funds . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-34000-5_2

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AN ANALYTICAL REVIEW OF THE LITERATURE ON PERFORMANCE EVALUATION OF MUTUAL FUNDS IN INDIA

Mutual Funds have evolved as an important investment option in the 21 st century. Its funds shareholding is increasing manifold year by year. Mutual Funds are effective and efficient and are gaining popularity among investors because of their convenient nature and easy operations with good returns. Therefore seeing the relevance of the topic, there is a need to do a review of literature and research done in the past on mutual funds. All the aspects of mutual funds have been covered namely Performance evaluation, Investor perception and relevance, History and evolution of Mutual funds, Selectivity and Market timing performance and Sector Funds. A Chronological study has been done. The most widely researched upon aspect of the mutual funds is " Performance Evaluation ". Researchers have compared the top – mutual fund houses of various times and compared public and private mutual funds. This helps the investor in the formulation of growth trends so that he may be able to forecast the future and increase his wealth. Investors were resistant to mutual funds in 1990s but their perception has changed relatively now. Mutual funds are rapidly emerging as an investment option due to the tax benefits associated with them.

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A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus, a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The mutual fund industry in India was started in the year 1963 with the formation of Unit Trust of India. This industry was privatized in the year 1993. The wide variety of schemes floated by these mutual fund companies gave wide investment choice for the investors. Among wide variety of funds equity diversified fund is considered as substitute for direct stock market investment. In this research paper an attempt is made to analyze the performance of the growth oriented equity diversified schemes on the basis of return and risk evaluation. The analysis was achieved by assessing various financial tests like Average Return, Sharpe Ratio, Treynor Ratio, Standard Deviation, Beta and Coefficient of Determination (R 2). The data has been taken from various websites of mutual fund schemes and from amfiindia.com. The analysis depicts that majority of funds selected for study have outperformed under Sharpe Ratio as well as Treynor Ratio.

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— As the concept of mutual fund is gaining more and more importance with a wide array of institutions vying to lure the investing public, a proper evaluation of performance of mutual funds, ability of the funds to diversify and time their investment is of practical importance for a valued judgment. Mutual Fund is one of the most preferred investment alternatives for the small investors as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The paradigm shift toward mutual funds assumed greater importance ever since the financial sector gained momentum under the globalized and liberalized environment. Each mutual fund has its own investment objective such as capital appreciation, high current income or money market income. A mutual fund generally states its own investment objectives and investors as a part of their own investment strategies choose the appropriate mutual fund for investment. The performance of the mutual funds products become more complex in context of accommodating both risk and return measurement while giving due importance to investment objectives.

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There are many reasons why investors prefer mutual funds. Buying shares directly from the market is one way of investing. But this requires spending time to find out the performance of the company whose share is being purchased, understanding the future business prospects of the company, finding out the track record of the promoters and the dividend, bonus issue history of the company etc. The present research is a study of examining and analysing equity mutual fund schemes by using different financial and statistical tools. Three schemes taken for this purpose are Large Cap, Small & Mid CAP, and Diversified Equity Mutual Fund Schemes. This paper was an attempt to evaluate the performance of equity mutual fund ranked 1 by CRISIL, and compared the annualized return with their category average and benchmark. The collected data have been analysed on basis of returns of last one year as on 16 may 2014. Various statistical and financial techniques namely, Standard Deviation and Sharpe ratio have been used to measure volatility of returns, and returns per unit of risk respectively. Furthermore, Coefficient of determination (R2), Expenses ratio and Corpus size of funds have also been evaluated.

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The mutual funds is one of the important classes of financial intermediaries enabling tens of thousands small and large savers across India to participate in and get the benefits of the capital market. The involvement of mutual funds in the transformation of India's economy makes it all the more important to review their services for their role in mobilization and allocation of funds in the markets. The mutual funds have a lot of potential to grow but to capitalize the potential fully, however, the need is to create and market innovative products and frame distinct marketing strategies. Moreover, the equity culture has not yet developed fully in India as such, investor education would be equally important for greater penetration of mutual funds. As such mutual funds are expected to perform better than the market, therefore calls for a continuous evaluation of the performance of funds. In an academic perspective, the goal of identifying superior fund managers is of great interest due to the challenges it provides to the efficient market hypothesis. The present study looks into the risk and return analysis of the select mutual funds in India.

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Literature review analysis and study on current status of mutual fund market in India

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Understanding Mutual Funds: A Comprehensive Guide for Investors

Learn how to invest in mutual funds and maximize your returns..

Mutual funds are being extinguished at a faster pace than new launches as trillions of dollars continue to drain from the products in favor of other investment options. This trend highlights the importance of understanding mutual funds and how they can play a crucial role in a well-diversified investment portfolio.

Steps to investing in mutual funds:

• Step 1: Determine your goals and risk tolerance
• Step 2: Research and choose your funds
• Step 3: Open an account with a reputable brokerage or fund company Mutual funds offer investors a way to pool their money together to invest in a diverse range of securities such as stocks, bonds, and other assets. By investing in a mutual fund, investors can benefit from professional management, diversification, and the convenience of automatic reinvestment of dividends.

Learn the dynamics of investing in the S&P 500 Index through ETFs and mutual funds. The S&P 500 Index is a popular benchmark for the U.S. stock market and offers exposure to the largest publicly traded companies in the country.

Here are seven of the best Vanguard mutual funds and ETFs for long-term investors. Vanguard is known for its low-cost index funds and ETFs that provide broad market exposure and competitive returns.

Mutual fund investors alert: Investors often make mistakes when investing in equity mutual funds by not tying their investments to specific goals and risk tolerance. It is essential to align your investment strategy with your financial objectives to achieve long-term success.

There are dozens of ESG funds to choose from. Forbes Advisor has combed through nearly 100 options to identify seven of the best ESG funds that prioritize environmental, social, and governance factors.

Grow your money in many ways from savings accounts to CDs, stocks, bonds, funds, alts, real estate, and crypto. Mutual funds offer a convenient way to invest in a diversified portfolio of securities without the need for individual stock selection.

After mutual fund KYC (know your customer) rules came into effect from April 1, around 3% of MF accounts have 'KYC Hold' status, highlighting the importance of complying with regulatory requirements to invest in mutual funds.

The 25 Best No-Load Mutual Funds You Can Buy include top-performing funds such as Dodge & Cox Stock and Fidelity Blue Chip Growth. No-load funds do not charge a sales commission, making them cost- effect options for investors.

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How to review your mutual fund investments periodically.

Compare each mutual fund’s performance against relevant benchmarks like market indices or peer group averages. Assess the risk and volatility of each mutual fund in your portfolio. Stay updated about any changes in the fund manager or investment team overseeing mutual fund schemes.

• Investors can seek professional advice if they are unsure about how to review mutual fund portfolio or make investment decision.

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Performance

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Fund description

The Fund seeks a favorable long-term total return, mainly through capital appreciation, by investing primarily in a portfolio of equity securities selected to track the overall U.S. equity markets based on a market index. It normally invests at least 80% of its assets in equity securities within its benchmark index, the Russell 3000® Index. The Fund buys most, but not necessarily all, of the stocks within its benchmark, and will attempt to closely match the overall investment characteristics of this index.

Important fund notice

Effective 01 May 2024, the Fund's name changed from TIAA-CREF Equity Index Fund to Nuveen Equity Index Fund. In addition, effective 06 May 2024, the Fund's Institutional, Advisor and Retail share classes were renamed, and an up-front sales charge was applied to certain purchases of Class A shares (formerly Retail Class shares). Please see the Fund's prospectus supplement dated 22 Jan 2024 for more details. These changes will not impact the Fund's investment strategy or portfolio management.

For term definitions and index descriptions, please access the glossary in the footer.

Fund basics

A contractual arrangement is in place that limits certain fees and/or expenses. Had fees/expenses not been limited (“capped”), currently or in the past, returns would have been lower. Expense cap expiration date: 28 Feb 2025. Please see the prospectus for details.

Average annual total returns

Calendar year returns, morningstar ratings.

Performance data shown represents past performance and does not predict or guarantee future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Total returns for a period of less than one year are cumulative. Returns without sales charges would be lower if the sales charges were included. Returns assume reinvestment of dividends and capital gains. *Performance shown for the Since Inception period and prior to the Fund's inception date is based on the performance of the Fund's R6 Class. Performance has not been restated to reflect the higher expenses of this share class. If the expense differential had been reflected, performance for these periods would have been lower.

Morningstar ratings may vary among share classes and are based on historical risk-adjusted total returns, which are not indicative of future results.

Breakpoint pricing

Distribution history.

For additional details about the Fund’s ordinary income, see the Fund’s Section 19(a) Notice.

Portfolio allocation

Sector allocation.

Securities lending may be utilized, and in such cases the collateral is included in the Short-Term assets shown.

All characteristics as a percentage of the fund's total net assets. Holdings and ratings are subject to change. Totals may not add up to 100% due to rounding.

Top ten portfolio positions

The holdings are subject to change and may not be representative of the Fund’s current or future investments. The holdings listed includes the Fund’s long-term investments and excludes any temporary cash investments and equity index products. Top holdings by issuer (for other than fixed income securities) includes the underlying ordinary shares combined with any depositary receipts, preferred shares, contract for differences (CFDs), rights, options and warrants. The holdings listed should not be considered a recommendation to buy, sell or hold a particular security.

• Fund literature
• Prospectuses & reports

Portfolio managers

Jim campagna, cfa ®, lei liao, cfa ®, darren tran, cfa ®.

Important information on risk

Mutual fund investing involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Prices of equity securities may decline significantly over short or extended periods of time. A portfolio that tracks an index is subject to the risk that it may not fully track its index closely due to security selection and may underperform when factoring in fees, expenses, transaction costs, and the size and timing of shareholder purchases and redemptions. These and other risk considerations, such as large, mid, and small-cap risks, are described in detail in the Fund’s prospectus.

Returns quoted represent past performance which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than their original cost. Current performance may be higher or lower than the performance shown. Total returns for a period of less than one year are cumulative. Returns without sales charges would be lower if the sales charges were included. Returns assume reinvestment of dividends and capital gains.

Class A shares are available for purchase through certain financial intermediaries or by contacting the Fund directly at (800) 257-8787. Retirement Class and Premier Class shares are generally available for purchase through employee benefit plans or other types of savings plans or accounts. Class I shares are available for purchase through certain financial intermediaries and employee benefit plans. Class R6 shares are available for purchase directly from the Fund by certain eligible investors (which include employee benefit plans and financial intermediaries). Class W shares have limited availability, please see the Fund’s prospectus for more details.

The Morningstar Rating TM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. ©2024 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Before investing, carefully consider fund investment objectives, risks, charges and expenses. For this and other information that should be read carefully, please request a prospectus or summary prospectus from your financial professional or Nuveen at 800.257.8787.

Nuveen, LLC provides investment solutions through its investment specialists. Teachers Advisors, LLC and TIAA-CREF Investment Management, LLC are registered investment advisers and affiliates of Nuveen.

Nuveen Securities, LLC, member FINRA and SIPC.

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Mutual Fund Calculator: Start Rs 1000 monthly SIP, grow your corpus to Rs 3.5 crore at retirement! Here’s how

In mutual fund investing, a systematic investment plan (sip) is an alternative to lump sum investment. not all can invest in mutual fund a lump sum or an aggregate amount, so sip or installment payment is a popular choice. sip investment allows investors to invest a fixed sum on a monthly basis. one can start….

Albert Einstein called compounding the eighth wonder of this world. How apt his observation was has been proved over the years by many investors who have shown that if money is invested and given time to grow, one can amass enormous wealth.

In mutual fund investing, a Systematic Investment Plan (SIP) is an alternative to lump sum investment. Not all can invest in mutual fund a lump sum or an aggregate amount, so SIP or installment payment is a popular choice. SIP investment allows investors to invest a fixed sum on a monthly basis. One can start an SIP with an amount as low as Rs 100 per month.

Mutual fund SIP calculator:

Suppose you start a job at the age of 20 with a monthly meagre salary of Rs 10,000 and are living with your parents, thus avoiding expenses on house rent, which can save a significant amount of money , especially if you live in a city. Mutual fund SIPs offer an opportunity to invest even with such a low salary. You just need to follow a 50/20/20/10 formula.

Using this formula, allocate 50% of your salary to regular expenditures or essential needs, reserve 20% for leisure activities like shopping and entertainment, set aside another 20% to save and invest for better returns to achieve larger goals such as purchasing a new car or property. Finally, the remaining 10% can be used to start a mutual fund SIP.

Also Read: Mutual Funds: How to earn Rs 1 crore faster with this 15-15-15 formula

Consider this calculation:

Suppose you invest Rs 1,000 or 10% of your salary in an MF SIP and receive a return of 12%, which is a moderate return based on mutual fund performance in the equity segment over the last decade. By the time you reach your retirement age at 60 years, you could become a crorepati.

The Rs 1,000 SIP at the rate of return of 15% can take you to Rs 1,19,000,00. This is the power of compounding.

Now, if you increase your SIP amount by 10% every year since your income will also grow with each passing year, this SIP over the 40 years can make a corpus of Rs 3.5 crore.

However, if your starting SIP amount is Rs 3,000 and you contribute this for the next 40 years and increase your contribution by 10% every year, your corpus at the time of retirement would be Rs 10.5 crore. To reach this corpus, you need to get an annual return of 12% on your deposits.

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