Special Comment

Moodys Global Fund Outlook

Indian Mutual Fund Market:
Moodys/ICRA Mutual Fund Management Style Categories And Indices Offer A More
Helpful Classification Than Traditional Categories
Summary Opinion
As the Indian mutual fund market has grown in size and number of funds, the traditional prospectus-based mutual
fund classification has steadily lost much of its value as an explanatory tool. Over the past 18 months, Moodys/ICRA
has identified 14 distinct management style categories, indicating that comparisons between mutual funds within the
traditional categories are problematic and, in certain cases, impossible.
Moodys/ICRA management style categories and mutual fund indices have suggested a strong trend towards less
specialised and more opportunistic management styles in the equity sector and a general move towards less risky man-
agement styles in the fixed-income sector.
The process of management style specialisation appears to be developing more quickly in the fixed-income arena,
where maturity-based management styles are beginning to become more evident, particularly in the Gilt sector and in
liquidity management.
However, equity diversified management styles display less of a distinct pattern, with equity managers continuing
to prefer broad investment mandates.
Nearly 50% of the traditional sector funds have been managed over the past 18 months as either diversified or bal-
anced funds. Following the so-called technology fund years in the late 1990s, sector management styles today reflect
more prudent and diversified investment strategies.
Income funds is the only traditional category which Moodys/ICRA clustering process has not segmented into the
new management style categories. Some income funds have in reality drifted towards the Gilt management style cate-
gories, in a possible reflection of a relatively illiquid corporate bond market.
Contact Phone
London
David A. Vriesenga 44-71-772-5403
Vania Schleef
Paris
Francesco Faiola 33-1- 4296-1424
Vanessa Robert
Milan
Enrico Bucalossi 39-02- 5821-5591
New Delhi (ICRA Ltd.)
Vippan Singh 91-11- 335-7940-50
Amul Gogna
February 2003
2 Moody s Special Comment
Overview: The Indian Mutual Fund Industry
Over the past ten years, the Indian mutual fund industry has been one of the fastest-growing sectors in the Indian cap-
ital and financial markets. From 1991 to 2002, the compound annual growth rate for the industrys assets under man-
agement averaged around 20%. The rapid growth has led to considerable changes in regulation, the structure of funds
available and the composition of net assets across various industry segments, as well as in the portfolio of investment
funds.
However, we believe there remains substantial scope for growth in the industry. In late 2002, net assets of mutual
funds still only represented approximately 11% of bank deposits. Moreover, the mutual fund industry accounts for
only 10% of the equity market capitalisation and 25% of debt markets.
At the same time, following a brief and impassioned flirtation with technology funds in both 1999 and 2000, which
ended with severe losses, the typical Indian investor has become more risk-averse and is beginning to invest more
rationally and cautiously, developing a more diversified portfolio of funds. Accompanying a return to bank deposits,
net sales of bond and money market funds have grown substantially as investors seek diversification and more stable
investments carrying less risk.
At the end of 2002, there were 34 asset managers of mutual funds, with 312 open-ended funds (schemes) sold in
the Indian market. Assets under management total INR 1.226 trillion (US$25 billion).
Introducing Moodys/ICRA Mutual Fund Management Style Indices
MUTUAL FUND CLASSIFICATION AND PERFORMANCE- BASED MUTUAL FUND INDICES
The principal objective of mutual fund categorisation and of performance-based mutual fund indices is to offer the
investor the opportunity to evaluate single fund performance and risk characteristics in the context of objective peer
groupings. By analysing the exposure of each fund to changes in the average return of the category, accurate mutual
fund categorisation and the resulting benchmarks can provide investors with appropriate information on funds over-
or under-performance.
In October 2002, Moodys Investors Service and ICRA Ltd. launched a new approach to Indian fund categorisa-
tion and a series of 18 mutual fund indices tracking the performance of equity and fixed-income mutual funds.
Figure 1. Moodys/ ICRA Mutual Fund Management Style Categories and Indices
Moodys/ICRA Diversified Management Style Index
Moodys/ICRA Diversified Value Management Style Index
Moodys/ICRA Balanced Defensive Management Style Index
Moodys/ICRA Equity Pharmaceutical Management Style index
Moodys/ICRA Balanced Management Style Index
Moodys/ICRA Index Management Style Index
Moodys/ICRA Technology Aggressive Management Style Index
Moodys/ICRA Technology Management Style Index
Diversified
Diversified Value
Balanced Defensive
Pharmaceutical
Balanced
Equity Index
Technology Aggressive
Technology
EQUITY AND BALANCED INDICES
AND CATEGORIES
Moodys/ICRA MIP Management Style Index
Moodys/ICRA Income Management Style Index
Moodys/ICRA ST Gilt Management Style Index
Moodys/ICRA LT Gilt Management Style Index
Moodys/ICRA Enhanced Cash Management Style Index
Moodys/ICRA Money Market Management Style Index
Monthly Income Plan
Income
Short-Term Gilt
Long-Term Gilt
Enhanced Cash
Money Market
FIXED-INCOME INDICES AND
CATEGORIES
Moodys/ICRA Equity Composite Management Style Index
Moodys/ICRA Fixed Income Composite Management Style Index
Moodys/ICRA Balanced Composite Management Style Index
Moodys/ICRA Money Market Composite Management Style Index
COMPOSITE INDICES
Moody s Special Comment 3
Unlike traditional classification and other major industry benchmarks, the Moodys/ICRA management style-
based categories and indices are the result of a new approach to the classification of mutual funds into performance-
based categories.
Moodys/ICRA categorises mutual funds into peer groups based exclusively on similarity of past performance pat-
terns, rather than according to local industry classifications or as indicated by prospectuses. The benefits of this
approach, which uses a quantitative procedure called cluster analysis, is that it offers a view of the actual performance
being delivered whereas traditional industry classification does not always capture the evolving nature of investment
strategies. In other words, a fund which has historically performed like a balanced fund should be grouped and moni-
tored in relation to other balanced funds even if the prospectuses or the traditional category classify the fund as an
equity diversified fund.
We believe our management style categories and indices can be used for the following purposes:
Tracking performance of the Indian mutual fund industry as a whole
Management style-based categories and indices capture the evolution of investment strategies. As assets and the
number of funds grow, increased specialisation and better definition of management styles are noted. The
Moodys/ICRA approach offers investors a more detailed insight into how the whole market is evolving and
helps them profile the changes within a coherent structure.
Tracking performance and evolution of major fund management styles
Each management style category and index is re-defined on a quarterly basis to provide investors with an
updated view of changing market dynamics and evolving investment styles. Moodys/ICRA categories do not
rely on a fixed number of funds and offer a clear picture of how fund management styles evolve in terms of style
drift, number of funds and assets under management.
Tracking winners/losers within fund management styles
Moodys/ICRA categories are the result of a purely quantitatively determined classification system. Funds can
therefore be coherently ranked inside each category and Moodys/ICRA indices can be used to construct relative
rankings.
Tracking fund management style integrity on a quarterly basis
Empirical studies show that asset allocation or exposure to asset class accounts for the majority of returns in
actively managed portfolios. Because of the quantitative nature of Moodys/ICRA categories and indices, these
can be used as proxies of asset classes and help investors evaluate the evolution of individual fund managers
management style.
4 Moody s Special Comment
What is Clustering Analysis?
Clustering Analysisisa statistical technique that groupsobjects in thiscase, mutual funds on the basisof similarity
of features in this case, weekly return patterns. The result is a purely quantitatively determined classification system
that segmentsmutual fundsinto peer groupswith similar characteristicsin termsof past performance.
As in any categorisation process, however, each cluster will then include funds that are more representative of the
group and othersthat are lessrepresentative. Thisconcept isintuitive. Figure 2 showsthe two-dimensional* picture of
a clustering process carried out on Indian equity funds using the weekly fund performance between June 2001 and
September 2002. Taking the Balanced fund cluster (shown in red) asan example, it isclear that Fund A ismore repre-
sentative i.e. iscloser to the cluster centre, the average performance of the category of the Balanced M anagement
style category than Fund B.
Cluster-based mutual fund classifications, or peer groups, therefore do not rely on a fixed number of fundsgiven that
fundschange their management style. For instance, Fund B could be migrating towardsa different management style.
It isin other wordsthe statistical methodology that definesthe peer group assignmentson an ongoing basis, helping to
capture changing market dynamicsand evolving fund investment strategies.
Figure 2. Equity Fund Universe Clustering
- 0 . 2 0
0 . 0 0
0 . 2 0
0 . 4 0
0 . 6 0
0 . 8 0
1 . 0 0
1 . 2 0
0 . 0 0 0 . 2 0 0 . 4 0 0 . 6 0 0 . 8 0 1 . 0 0 1 . 2 0
D v r s
V a l
B a l D
P h a r m
B a l
In d e x
T e c h A
T e c h
S e l e c t i o n
Fund B
Fund A
* Figure 2 represents a two-dimensional picture of the clusters. A three-dimensional view would offer a better view of how the clusters diverge. In the chart, the
pharmaceutical sector (shown in light blue) appears to be in the middle of the balanced sector (shown in red). In reality, the cluster is above the balanced sector
and therefore distinct.
Moody s Special Comment 5
Analysing the Indian Mutual Fund Industry Using Moodys/ICRA Categories and Mutual Fund
Management Style Indices, J une 2001 -October 2002
TRACKING THE EVOLUTION OF MANAGEMENT STYLES IN THE INDIAN MUTUAL FUND INDUSTRY
The growth in number and variety of mutual funds in the Indian market, combined with the widening scope of the
type of investment strategies they pursue, is contributing to divergent behaviour among funds pursuing the same
investment objective. Mutual funds in India still enjoy broad latitude in developing their investment emphasis and tra-
ditional categorisation often fails to adequately describe the investment product that is being delivered.
Figure 3 shows the result of a cluster-based categorisation process carried out on NAV data from 230 eligible
1
Indian mutual funds from 30 June 2001 to 30 September 2002 and compares the new management style categories
with the traditional Indian categories. (See Appendix 3 for definitions of Moodys/ICRA categories.)
Excluding the traditional Equity-Linked Saving Scheme (ELSS) category (which reflects a fiscal advantage rather
than a major asset class or management style), the Moodys/ICRA clustering process has determined that in the refer-
ence period a total of 14 distinct management styles best represented the behaviour of Indian mutual fund managers.
All of the key traditional categories excluding Income
2
are broken down into at least two more precisely defined
categories. Equity mutual funds are segmented from three traditional categories Diversified, Sector and Balanced
into eight new management style categories. Composite categories reflect four principal group management styles.
Figure 3. Comparing Traditional Categorisation with Moodys/
ICRA Categories (June 2001- Sept 2002)
Traditional Industry Categories Moodys/ICRA Management Style Categories
Equity Diversified Equity Diversified
ELSS Equity Diversified Value
Equity Index
Equity Sector Equity Technology
Equity Technology Aggressive
Equity Pharmaceuticals
Balanced Balanced Defensive
Balanced
Money market Enhanced Cash
Money Market
MIP MIP
Gilt Gilt Short-Term
Gilt Long-Term
Income Income
1. To be eligible, a fund must have been launched before 30 June 2002. This excludes UTI-64, Indias largest mutual fund, which was launched in 1964 but has started
to calculate daily NAV only as of January 2002 .
2. The single Income cluster could be the result of the reference period. It is possible (and probable) that, as the time frame lengthens, two or more distinct Income clus-
ters will begin to show.
6 Moody s Special Comment
Figure 4 displays how the universe of eligible funds breaks down into Moodys/ICRA management style categories
as of September 2002. This data set acts as the basis for the calculation of the Moodys/ICRA management style indi-
ces. Figure 5 below, on the other hand, tracks absolute 3-, 6-, 9-, 12- and 15-month returns for all 18 Moodys/ICRA
Management Style indices. The returns indicate the following:
1. Fixed-Income mutual funds have, on average, performed more consistently than equity funds. Composite indi-
ces also indicate that as a sector, Fixed-Income funds have performed better on average.
2. There are marked differences between the cluster-based categories in terms of average absolute returns, indicat-
ing that management style performance is distinct from one another. This suggests that management style-based
categorisation can better explain fund performance than can traditional categories.
3. In the Equity sector, the performance of the value index clearly distinguishes itself from that of the other two
diversified clusters (Equity and Index). Within traditional sector funds, the Pharmaceutical sector has lower
absolute performances, close to the Balanced Defensive category, indicating the defensive nature of this manage-
ment style and its dissimilarity from the Technology Aggressive performance, which seems to confirm that the
category is a more aggressive management style version of the Technology peer group.
4. The Money Market composite index which groups the enhanced Cash and the Money Market categories,
which respectively reflect a shorter- and a longer-term management style is the least volatile in terms of abso-
lute performance.
5. Finally the Gilt indices clearly indicate the existence of a management style segmentation inside the traditional
gilt category.
Figure 4. Name, Number of Funds and Assets Under Management per
Management Style Category (June 2001- Sept 2002)
Management Style Categories
Group Short Full No. of Funds % of total Assets % of total
Dvrs Diversified 11 4.8% 1204.60 2.3%
Val Value 12 5.2% 554.16 1.0%
BalD Balanced Defensive 8 3.5% 122.03 0.2%
Pharm Pharmaceutical 4 1.7% 173.69 0.3%
Equity Bal Balanced 38 16.5% 2193.29 4.1%
Index Equity Index 43 18.7% 4335.27 8.2%
TechA Technology Aggressive 4 1.7% 647.52 1.2%
Tech Technology 8 3.5% 603.32 1.1%
MIP MIP 14 6.1% 2908.49 5.5%
Income Income 25 10.9% 25770.87 48.6%
GiltS Gilt Short 13 5.7% 313.05 0.6%
Fixed Income GiltL Gilt Long 25 10.9% 3235.80 6.1%
Liquid Enhanced Cash 21 9.1% 9733.12 18.4%
MM Money Market 4 1.7% 1246.25 2.3%
CmpEq Composite Equity 128 55.7% 9833.88 18.5%
Composite CmpFI Composite Fixed-Income 102 44.3% 43207.58 81.5%
CmpBal Composite Balanced 46 20.0% 2315.32 4.4%
CmpMM Composite Money Market 25 10.9% 10979.37 20.7%
Moody s Special Comment 7
Figure 5. Moodys/ ICRA Mutual Fund Management Style Indices: Absolute Returns Since Inception
Together, Figures 4 and 5 introduce some general considerations:
1. Each of the 14 management style categories is clearly defined and reflects distinct asset classes. All are clearly
distinguished from each other in terms of performance. This indicates that traditional prospectus-based
categorisation must be improved to reflect these different asset classes and management strategies.
2. Fixed-income categorisation is primarily determined by maturity management. Neither the traditional Gilt nor
Money Market categories distinguish particularly in the case of the Gilt category between what we identify
as two clear average maturity-based management styles. From an investor perspective, this means that mutual
funds in the two management style categories are liable to react differently to changing interest rates.
3. The same maturity-based distinction is not at the moment evident in the Income sector, which is the biggest cat-
egory in terms of assets under management (AUM). This could be due to an illiquid corporate bond market
where trading volumes are low and mark-to-market valuations are often difficult to obtain with the result that
funds prefer to hold corporate paper to maturity, making it difficult to implement specific alternative investment
strategies.
4. Each of the two traditional Equity categories Sector and Diversified is segmented into three management
styles: a core large cluster and two secondary clusters. The secondary clusters, which account for a lower number
of funds and an even lower relative share of AUM, reflect a more specific diversified investment strategy in terms
of either a stronger value or a stronger growth orientation in the case of the traditional Diversified fund cate-
gories or a more Aggressive (Tech Aggressive management style) or Defensive (Pharmaceutical management
style) in the case of traditional Sector fund categories.
5. The Balanced Defensive Management style and, to a certain extent, the Short-Term Gilt category also corre-
spond to secondary clusters that still represent little in terms of AUM but much more in terms of number of
funds. This could be the result of a cluster that is formed mostly by new funds that have entered the market in
volatile conditions, in a decresing interest rate enviroment and have preferred to take initially less risk.
6. There are in reality few (16) pure sector funds; these account for less than 20% of total AUM in equity mutual
funds. As a general trend, Equity fund managers still prefer an opportunistic management style with an emphasis
on large investments. This is in line with the evolution of an emerging mutual fund market, in which asset class-
or sector-based management styles are initially less defined and fund managers prefer to have broad manage-
ment mandates.
July 2001-
September 2001
July 2001-
December 2001
July 2001-
March 2002
July 2001-
June 2002
July 2001-
September 2002
Dvrs -18.7% 4.1% 11.9% 12.2% -1.8%
Val -17.6% 2.1% 18.2% 38.9% 14.0%
BalD -1.9% 6.1% 10.3% 11.7% 6.1%
Pharm -3.6% 5.7% 17.5% 14.5% 5.9%
Bal -8.0% 3.9% 13.6% 15.8% 5.9%
Index -15.6% 1.3% 13.5% 15.2% 0.5%
TechA -37.4% 10.3% 10.3% 6.1% -6.5%
Tech -28.5% 7.8% 12.9% 11.3% -2.5%
MIP 2.1% 5.7% 9.0% 11.3% 13.0%
Income 2.9% 7.5% 12.0% 13.3% 17.0%
GiltS 3.4% 5.6% 9.0% 9.6% 12.2%
GiltL 4.1% 12.3% 19.3% 18.7% 22.9%
Liquid 2.1% 4.0% 5.8% 7.7% 9.5%
MM 2.7% 5.2% 7.4% 9.3% 11.3%
CmpEq -14.4% 3.5% 13.6% 16.4% 3.2%
CmpFI 3.0% 7.6% 11.9% 12.9% 16.0%
CmpBal -6.9% 4.3% 13.0% 15.1% 5.9%
CmpMM 2.2% 4.2% 6.1% 8.0% 9.8%
8 Moody s Special Comment
Figure 6 cross-references Indian funds in the traditional categories and in the Moody's/ICRA management style
categories. The traditional Indian categories are displayed on the vertical axis with the Moody's/ICRA management
style categories on the horizontal axis. The following key conclusions can be drawn:
1. Traditional categories are less successful in adequately describing what mutual funds are actually investing in.
Comparing the distribution of funds in the traditional categories to their distribution in the management style
categories, those funds classified within each traditional category are dispersed among various of the management
style categories, suggesting that historically their performance patterns have been different.
2. During the reference period analysed, there has been a strong trend towards less risky/less specialised manage-
ment styles, particularly in the Equity sector.
3. There are clear patterns in the dispersion of the traditional "Sector" and "Income" funds:
Sector Funds. Out of the 32 funds classified as Sector funds by traditional categorisation, more than half have
been managed for the past year and a half in a similar style to a balanced or diversified fund. This move towards
more defensive management styles is in fact in line with what has happened in the Indian financial markets, with
technology stocks in particular having displayed shown high volatility.
Income Funds. The dispersion in this case is less evident as the Income management style category still
accounts for 21 of the 33 traditional Income funds. However, it is interesting to note how some Income funds
have moved towards an MIP, a Gilt or, in certain cases, a Money Market management style. Again this is in line
with a general trend towards less risky management styles.
4. Funds in the traditional Diversified category also show a high level of dispersion, but always within a generic
diversified management style. In only one case, a fund which was classified as diversified under the traditional
classification has moved towards a "sector" management style (namely, Technology Aggressive).
5. Funds in the Equity Tax Saving category have in reality been managed with very varied investment strategies
over the past year and a half. Again traditional categorisation is less helpful in explaining to investors what has
happened in this category as performances and risk appetites would have varied between the ELSS funds.
Figure 7 adds supporting evidence to the general trend mentioned above of a movement towards less specialised
management styles, particularly in the Equity sector. Excluding the funds in the traditional ELSS category, the migra-
tion of sector funds towards balanced and diversified management styles is very evident in terms of both number of
funds and AUM. The same movement to less risky management styles is also evident in the fixed-income sector, where
Income funds have migrated towards Gilt, MIP and MM management styles.
Figure 6. Distribution of Indian Mutual Funds across Moodys/ ICRA Management Style Categories and
Traditional Categories
Category/Cluster Bal BalD Dvrs GiltL GiltS Income Index
Enhanced
Cash MIP MM Pharm Tech TechA Val
Grand
Total
Balanced 23 7 2 1 33
Equity Diversified 5 3 28 1 9 46
Equity Sector 7 3 6 4 8 3 1 32
Equity Tax Saving 3 1 3 8 2 17
Gilt 22 12 1 35
Income (Debt) 3 1 21 6 2 33
Money Market 21 2 23
Monthly Income Plan 4 7 11
Grand Total 38 8 11 25 13 25 43 21 14 4 4 8 4 12 230
Figure 7. Indian Mutual Funds and AUM per Traditional Categories
Number of Funds Assets Under Management
Traditional Moodys/ICRA Traditional Moodys/ICRA
Balanced 33 42 2176.88 2282.17
Diversified 46 53 5236.78 5726.25
Sector 32 16 3018.69 1424.53
Gilt 35 38 3012.15 3546.85
Income 33 25 28723.79 25770.82
MM 23 25 9912.38 10979.37
MIP 11 14 1559.26 2908.49
Moody s Special Comment 9
What are Primary Cluster Analysis and Effective Mix Analysis?
Empirical studies, based on attribution analysis, show that asset allocation, or exposure to asset classes, accounts for the
majority of the returns of actively managed portfolios. By defining M oodys/ICRA management style categories as proxies
of asset classes, M oodys/ICRA mutual fund indicescan help evaluate how individual fund managershave performed their
functionsand the extent to which they changed their style and have added (or lost) value through active management.
There are two regression-based techniques available to help us evaluate how the exposure of mutual funds has changed
relative to changesin the return of the benchmark:
1. Primary Cluster Analysis. In this first case, the regression analysis is conducted only against the performance of
M oodys/ICRA mutual fund management style index, which representsthe biggest exposure of the fund, i.e. the index
that reflectsthe category in which the fund hasbeen classified. The performance that isnot explained by thisindex is
considered asresidual and not analysed. Thisapproach isthe one most commonly used by retail investorsto evaluate
their fundsrelative performance.
2. Effective Mix Analysis. In this second case, the mutual fund performance is assessed against all the management
style indices to which the fund has been exposed. An effective mix approach
3
is employed as if the mutual fund
were invested in the returnsof a composite of variousmanagement style indices. In thiscase, the performance of the
fund isbetter explained by the indicesand the residual performance isusually much smaller.
Figure 8 providesan example of the analytical techniquesexplained above. The chart showsover time what indices, and in
what percentage, have explained the performance of the analysed fund.
Figure 8. Example of Equity Funds Performance Analysed Over Time
The primary cluster of thisfund isthe Equity Index M anagement Style Index, which explainson average over 60% of the
fundsperformance with peaksover 80% . While the primary cluster analysiswould compare the past performance of this
fund only to the historical returns of the Equity Index M anagement Style Index, an effective mix analysis would create a
composite index that reflected the historical exposure of the fund to each of the 14 management style indicesshown in
the chart. In fact, the performance of the fund would be evaluated against the combination of style indices that best
explain the single fundsset of historical investment returns.
Asa result, there are potentially two setsof data. In the first case, one can investigate how closely and how well the fund
hasperformed with respect to an average performance of fundsthat have been managed in a similar way. The cost of
thisanalysisisthe lossof information that hasresulted from avoiding an analysisof the residual performance; thisis, how-
ever, offset by the benefit of using a standard benchmark measure that allowsan objective comparison of all the fundsin
the category. Thisanalytical technique ranksthe fundsin the same management style category without considering where
all the single fund performance iscoming from. In the second case, because every fund would have a personal effective mix
benchmark constructed on the basisof itspast exposure, there isno possible direct comparability between the funds. The
analysisfocusesprimarily on performance attribution and style drift and allowsthe investor to overlay a qualitative judge-
ment of the fund manager.
3. This approach was pioneered by Prof. William Sharpe. See Sharpe, William F.: Asset Allocation: management style and performance measurement, Journal of
Portfolio Management, winter 1992 pp 7-19
Dec-01
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10 Moody s Special Comment
TRACKING THE PERFORMANCE OF THE MOODYS/ ICRA MANAGEMENT STYLE CATEGORIES
Figures 3-5 suggest that the clustering process helps to improve the descriptive value of mutual fund categories. How-
ever, the key question is to what extent are the Moodys/ICRA categories more successful in usefully explaining mutual
fund performance. Figures 9-12 quantify the improvement with respect to the average performance of traditional cat-
egories. This is done by calculating the R2
4
coefficients of each fund against a set of benchmarks. Figure 12 in Appen-
dix 1 contains the regression coefficients for each of the 230 eligible funds used in this analysis.
Figure 9 below shows the average R2 coefficients calculated for primary clusters (Moodys/ICRA mutual fund
management style indices), effective mix benchmarks
5
and traditional Indian categories benchmarks.
6
In this table,
column 1 shows the management style categories, column 2 the average R2 calculated using an effective mix bench-
mark, column 3 the average R2 calculated using an effective mix benchmark calculated without the inclusion of the
primary cluster, column 4 calculates the average R2 using only the management style index (primary cluster) as the ref-
erence benchmark, column 5 the R2 of the traditional categories, and finally columns 6 and 7 show the average differ-
ence respectively between the R2 calculated using primary cluster minus the R2 calculated using the traditional
category benchmark and the effective mix R2 minus the traditional category R2.
Figure 9. Average Primary Cluster, Effective Mix Benchmark and Traditional Category Benchmark
Regression Coefficients per Moodys/ ICRA Management Style Category
A few other general conclusions can be drawn:
1. Columns 6 and 7 of Figure 9 are all positive, meaning that the average explanatory power of the Moodys/ICRA
indices is always higher than using a traditional category benchmark. In other words, the Moodys/ICRA indices on
average explain mutual funds performance better than traditional category benchmarks do.
2. Even if there is an improvement with respect to the traditional category benchmarks, primary cluster and effec-
tive mix regression coefficients are much lower in the Fixed-Income categories. This is probably indicative of
greater dissimilarity of fund performance inside each fixed income management style category.
3. Improvement is particularly evident in the case of the Pharmaceutical, Tech Aggressive and Gilt Short-Term
categories, but is also substantial in other clusters such as Diversified Value, Money Market and Technology.
The percentage improvements in columns 6 and 7 should be read as improvements in performance that the tra-
ditional benchmark leaves unexplained. Taking as an example the Value Management Style Category, which
shows an absolute improvement of 7.3%, this figure should be read as a relative improvement of nearly 30%. In
other words, if the traditional benchmark could not explain on average 25.6% (100%-74.4%) of the perfor-
4. R2 is a statistical measure used to calculate how closely a funds performance can be explained by the performance of an index. The measure ranges from 0 to 1 (or
100), where 0 indicates no explanatory power and 1 (or 100) indicates perfect explanatory power i.e. the fund has performed in the exact same way as the index .
5. See sidebar Primary Cluster and Effective Mix Analysis
6. In this case, Moodys/ICRA has calculated the non-weighted average performance of the funds in each traditional category and regressed it against the funds in the
Moodys/ICRA management style categories.
Moodys/
ICRA
Category
R2
(Effective
Mix)
R2
(EffectiveMix/
Primary
Cluster)
R2
(Primary
Cluster)
R2
(Traditional
Category
Benchmark
)
Primary
Cluster-
Category
Benchmark
EffectiveMix
Category Benchmark
Dvrs 92.0% 91.5% 90.8% 86.1% 4.7% 5.9%
Val 83.0% 72.7% 81.7% 74.4% 7.3% 8.7%
BalD 70.8% 68.4% 67.5% 64.8% 2.7% 6.0%
Pharm 88.6% 54.8% 87.7% 46.1% 41.6% 42.6%
Bal 83.2% 82.4% 81.0% 79.2% 1.8% 4.0%
Index 88.5% 85.6% 87.5% 85.2% 2.3% 3.3%
TechA 94.6% 89.7% 94.4% 76.7% 17.7% 17.9%
Tech 95.2% 92.0% 94.9% 86.3% 8.6% 8.9%
MIP 54.8% 48.6% 48.6% 44.2% 4.4% 10.6%
Income 90.5% 86.2% 88.8% 88.0% 0.9% 2.5%
GiltS 75.2% 56.0% 72.0% 57.4% 14.6% 17.8%
GiltL 87.7% 73.6% 86.9% 86.0% 0.9% 1.7%
Enhanced 65.0% 4.2% 64.3% 64.3% 0.0% 0.7%
MM 48.7% 30.8% 36.7% 29.8% 6.9% 18.9%
Moody s Special Comment 11
mance of the funds in that category then an absolute improvement of 7.3% is in reality a relative improvement
of 28.58% of what was previously left unexplained. Figure 10 summarises the improvements per management
style category in relative terms.
4. Apart from the MIP and Money Market categories, all other primary clusters do a good job explaining cluster
performance. From a cluster perspective, this means that, in general, funds in the same cluster show strong sim-
ilarity in return patterns. Graphically this can be seen by calculating the distance
7
of each fund from the cluster
centre, which reflects average performance of the cluster and is used in the calculation of the Moodys/ICRA
indices. The MIP and MM
8
management style categories in fact show a very scattered cluster graph with large
distances. Figure 10 below summarises average distance per category.
5. On average terms, there are no extreme differences between the explanatory power calculated using an effective
mix (e-mix) approach or a primary cluster approach, but the e-mix approach always has a higher R2 coefficient.
This probably means that the average performance of certain management style categories has been relatively
similar. In particular, the Equity categories for instance, Diversified, Value and Equity Index and Tech Aggres-
sive and Tech have probably shown similarities in performance patterns.
6. Column R2 EffectiveMix/Primary Cluster of Figure 9 illustrates average R2 coefficients calculated using an e-
mix benchmark without primary cluster and correlations still remain on average quite high with the equity funds
but less so in the fixed-income group. This confirms that:
Equity management styles are not as distinct as Fixed-Income management styles.
Equity fund managers have a less style-based and more opportunistic approach to fund management.
7. The Pharmaceutical, Enhanced Cash, Money Market, Gilt Short-Term and Gilt Long-Term and Diversified
Value management styles are, in decreasing order, the categories in which the primary cluster is most represen-
tative of the average performance.
Figure 11. Moodys/ ICRA Management Style Index: Relative
Percentage Improvement of Unexplained Performance over
Traditional Category Benchmarks
As a support to the regression analysis carried out above on the Moodys/ICRA management style categories, Figures
13 to 18 in Appendix 2 present the results of a correlation study carried out between Traditional Category benchmarks,
Moodys/ICRA Management Style indices and eight Local Equity Market Indices. The results confirm the following:
1. Traditional categories are more correlated to each other, indicating a less specialised classification system.
Correlation is in fact less differentiated than in the case of Moodys/ICRA categories when comparing to equity
market indices.
7. See Appendix 1. Column 8 of Figure 12 shows the distance calculated per each fund from the cluster centre.
8. In the case of the MM cluster (and, to a certain extent, the Enhanced Cash MIP cluster), it is probable that that the low correlation is also the result of the impact that
very small differences in performance cause to the clustering process. The fact that MM funds performance differentiate in very small absolute terms makes the pro-
cess more reactive to small average changes.
Figure 10. Average Distance to
Cluster Centre per Category
Category Average distance
Dvrs 3.6
Val 5.6
BalD 3.8
Pharm 2.7
Bal 2.9
Index 3.6
TechA 4.9
Tech 4.7
MIP 5.8
Income 2.4
GiltS 3.9
GiltL 2.8
Enhanced cash 9.6
MM 9.6
Category Cluster
%
Improvement
Dvrs 33.7%
Val 28.5%
Index 7.7%
TechA 77.2%
Tech 8.6%
Pharm 15.5%
Bal 75.8%
BalD 62.5%
MIP MIP 7.8%
Income (Debt) Income 7.2%
GiltS 34.3%
GiltL 6.6%
En Cash 0.02%
MM 9.8%
Diversified Equity
Equity Tax Savings
Equity Sector
Gilt
Money Market
Balanced
12 Moody s Special Comment
2. Moodys/ICRA categories do in fact reflect differences in management styles. Correlation to both market indices
and traditional category benchmarks is very different, indicating that performance in the categories has been dif-
ferent. What this means is that funds in different categories have been managed differently in terms of manage-
ment strategy and probably investment objective.
3. Management style specialisation is more evident in the fixed-income categories. In general, equity categories are
more correlated to each other indicating less diversification in management styles.
4. Balanced categories are still very closely correlated to equity indices/benchmarks.
Conclusions
The Indian mutual fund industry is still in an evolutionary phase. Products are yet not commoditised, asset manage-
ment firms have not yet consolidated, distribution is improving but still patchy, investors need to be educated and
rarely invest with long-term horizons and asset manager specialisation is still in an embryonic stage. Moreover, the
market remains subject to the influence of changing regulation, fiscal incentives and general legislation.
The analysis carried out in the Indian mutual fund market using the Moodys/ICRA management style categories
and mutual fund indices in this time period supports this picture of a developing market and suggests the beginning of
some interesting trends reflecting a market which is slowly beginning to mature:
As the market has grown in size and number of funds, the traditional prospectus-based mutual fund classification
has steadily lost much of its value as a descriptive tool. Over the past year and a half, differences in management
styles between funds in the same traditional categories have begun consolidating, making comparisons between
mutual funds in the same category difficult and, in certain cases, impossible. Consequently, investors will have
seen funds within the same traditional category that have very different results and very different risk appetites
from each other.
The Moodys/ICRA categories and indices suggest a strong trend towards less specialised and more opportunis-
tic management styles in the equity sector and a general move towards less risky management styles in the fixed-
income sector.
The process of management style specialisation appears to be developing more quickly in the fixed-income
arena, where maturity management styles are beginning to become more evident, particularly in the Gilt sector
and in liquidity management. Equity management styles, on the other hand, are less distinct from each other, as
equity managers continue to prefer broad investment mandates.
The majority of diversified equity funds are still managed with a very opportunistic approach. Equity Index,
Diversified and Value management styles are still relatively correlated. However, Equity Diversified and Equity
Value management style categories reflect the beginning of a more specific growth and a value-oriented invest-
ment strategy. These clusters clearly do not yet indicate a strong specialisation as regards management style.
However, they do suggest a segmentation in diversified funds investment strategies and a degree of consolida-
tion.
Nearly 50% of the traditional sector funds have been managed in the past 18 months as either diversified or bal-
anced funds, indicating that all equity managers have in general moved towards more defensive and less risky
investment strategies. Following the technology fund bonanza in the late 1990s, sector management styles today
reflect more prudent investment strategies.
Income funds is the only traditional category for which the Moodys/ICRA clustering process has not led to a
segmented classification. However, some income funds have in reality drifted towards the Gilt management style
categories, possibly reflecting a relatively illiquid corporate bond market.
Moody s Special Comment 13
Appendix 1
Figure 12 charts the ratio of the single fund R2 coefficient to the distance to cluster centre, confirming that the higher
the R2 on average, the closer the fund is to the centre i.e. the higher the R2, the more accurately the management
style index explains the funds performance.
Figure 12. Single Fund Primary Cluster, Effective- Mix and Traditional Category Benchmarks Regression
Coefficients and Distance to Cluster Centre
Name
Traditional
Category
Moodys/
ICRA Cluster
R2
(Mix)
R2
(Mix/PC) R2(PC) R2(Cat)
Distance to
Cluster
Centre
Sundaram Balanced Fund (G) Balanced Bal 95.3% 95.3% 93.5% 94.4% 1.569
DSP-ML Balanced Fund (G) Balanced Bal 96.3% 96.3% 94.1% 94.6% 1.993
Tata Young Citizens Fund Balanced Bal 92.6% 92.3% 91.7% 90.0% 2.026
Tata Balanced Fund Balanced Bal 93.1% 92.9% 92.0% 90.7% 2.033
Franklin India Balanced Fund (G) Balanced Bal 94.7% 94.7% 90.2% 93.0% 2.051
Pru ICICI Balanced Fund (G) Balanced Bal 92.6% 92.2% 90.4% 91.0% 2.111
HDFC Childrens Gift Fund (Inv Plan) Balanced Bal 92.3% 92.3% 89.4% 89.7% 2.198
K Balance Balanced Bal 92.4% 92.4% 89.0% 90.7% 2.225
Franklin India Balanced Fund (D) Balanced Bal 95.0% 95.0% 88.7% 92.2% 2.243
HDFC Balanced Fund (G) Balanced Bal 95.0% 95.0% 91.4% 92.7% 2.308
JM Balanced Fund (D) Balanced Bal 87.5% 87.5% 84.4% 84.4% 2.428
FT India Balanced Fund (G) Balanced Bal 93.7% 93.7% 90.2% 92.4% 2.670
Zurich (I) Prudence (G) Balanced Bal 87.6% 87.4% 87.0% 85.9% 2.696
SUN F&C Balanced Fund (G) Balanced Bal 96.3% 96.1% 90.4% 92.7% 2.730
Dundee Balanced Fund (G) Balanced Bal 85.7% 83.7% 85.2% 82.5% 2.770
Birla Balance (G) Balanced Bal 84.4% 83.8% 83.6% 82.1% 2.852
Cantriple+ Balanced Bal 95.1% 95.1% 83.6% 90.8% 2.862
UTI UGS 10000 Equity Sector Bal 81.4% 78.3% 79.8% 65.2% 2.892
Magnum Balanced Fund Balanced Bal 84.6% 83.0% 84.2% 82.1% 2.981
IDBI-PRINCIPAL Balanced (G) Balanced Bal 77.5% 75.3% 77.3% 74.6% 2.983
UTI Primary Equity Fund Equity Diversified Bal 88.6% 86.6% 89.3% 85.3% 3.203
Birla MNC Fund (G) Equity Sector Bal 80.5% 78.4% 78.3% 76.6% 3.256
UTI Unit Scheme - 1995 (G) Balanced Bal 81.5% 79.9% 81.3% 79.9% 3.272
Escorts Balanced Fund (G) Balanced Bal 70.5% 68.6% 70.2% 69.4% 3.289
GIC DMAT Equity Diversified Bal 76.2% 74.4% 74.9% 69.6% 3.349
GIC Balanced Fund Balanced Bal 75.2% 73.7% 74.8% 69.9% 3.374
JM Balanced Fund (G) Balanced Bal 80.2% 80.2% 76.3% 76.1% 3.491
K MNC Equity Sector Bal 72.9% 70.7% 68.9% 58.9% 3.551
Franklin FMCG Fund (G) Equity Sector Bal 70.3% 69.7% 69.4% 64.3% 3.646
Tata Life Sc & Tech Fund (I) Equity Sector Bal 79.3% 79.2% 72.3% 58.2% 3.669
Zurich (I) Capital Builder (G) Equity Diversified Bal 75.9% 74.5% 72.4% 66.9% 3.761
Birla Equity Plan Equity Tax Saving Bal 85.7% 85.3% 84.2% 85.4% 3.949
Dundee Taxsaver Fund (G) Equity Tax Saving Bal 87.0% 86.8% 88.8% 85.6% 3.979
Escorts Growth Plan (G) Equity Diversified Bal 86.1% 85.5% 85.7% 85.3% 4.400
Pru ICICI Power Equity Diversified Bal 82.8% 81.9% 81.2% 77.8% 4.629
HDFC Tax Plan 2000 (G) Equity Tax Saving Bal 81.4% 80.1% 80.7% 78.6% 4.651
Pru ICICI FMCG Fund (G) Equity Sector Bal 65.7% 65.0% 65.3% 62.0% 4.758
JM Basic Fund Equity Sector Bal 8.2% 8.2% 7.9% 7.9% 14.426
IDBI-PRINCIPAL Child Benefit Fund-
Career Builder Balanced BalD 87.2% 85.7% 84.0% 85.8% 2.372
IDBI-PRINCIPAL Child Benefit Fund-
Future Guard Balanced BalD 87.1% 85.6% 83.9% 85.7% 2.377
Templeton India Pension Plan (G) Balanced BalD 83.9% 83.9% 74.0% 78.9% 2.923
PNB Balanced Growth Fund (G) Balanced BalD 74.8% 73.7% 70.8% 69.8% 3.053
LIC Dhanaraksha 89 Balanced BalD 35.5% 30.7% 33.2% 29.3% 4.456
LIC Dhanasahayog C (G) Balanced BalD 59.7% 56.3% 55.6% 46.0% 4.565
LICMF Tax Plan Equity Tax Saving BalD 87.1% 85.7% 86.1% 83.4% 5.047
14 Moody s Special Comment
Canpremium Balanced BalD 50.9% 45.6% 52.6% 39.5% 6.263
Franklin India Tax Shield (G) Equity Tax Saving Dvrs 96.7% 96.5% 95.1% 94.7% 2.465
SUN F&C Value Fund (G) Equity Diversified Dvrs 94.5% 94.5% 93.4% 91.4% 2.973
Canexpo Equity Sector Dvrs 95.5% 94.7% 95.0% 90.4% 3.004
Alliance 95 Fund (G) Balanced Dvrs 95.9% 94.9% 95.5% 85.5% 3.025
Franklin India Prima Plus Fund (G) Equity Diversified Dvrs 93.7% 93.1% 92.3% 89.7% 3.099
Alliance Equity Fund (G) Equity Diversified Dvrs 94.9% 94.7% 94.9% 87.9% 3.364
Alliance Tax Relief 96 Equity Tax Saving Dvrs 91.9% 91.3% 91.7% 85.1% 3.654
UTI Services Sector Fund Equity Sector Dvrs 87.6% 87.6% 84.8% 83.7% 4.135
ING Balanced Portfolio (G) Balanced Dvrs 90.8% 90.4% 87.2% 75.0% 4.288
Canequity Taxsaver Equity Tax Saving Dvrs 92.6% 92.1% 94.4% 88.3% 5.135
Chola Freedom Technology (G) Equity Sector Dvrs 77.5% 76.9% 74.4% 75.0% 5.145
K Gilt (Invest) (G) Gilt GiltL 97.6% 82.1% 97.6% 97.6% 1.371
Pru ICICI Gilt Investment Plan (G) Gilt GiltL 96.9% 76.9% 96.9% 97.1% 1.459
K Gilt Serial 2011 (G) Gilt GiltL 96.5% 82.1% 96.5% 95.9% 1.585
Birla Gilt Plus (Regular Plan) (G) Gilt GiltL 95.0% 72.3% 94.5% 92.2% 1.953
JM G-Sec Fund (RP) (G) Gilt GiltL 93.8% 73.5% 93.6% 90.8% 2.046
Templeton India Govt Sec (G) Gilt GiltL 92.4% 68.1% 92.3% 89.6% 2.226
JM G-Sec Fund (PFP) (G) Gilt GiltL 93.7% 75.9% 93.7% 90.8% 2.234
K Gilt Serial 2013 (G) Gilt GiltL 94.6% 76.8% 94.6% 93.1% 2.351
DSP-ML Govt. Sec. Fund A (G) Gilt GiltL 91.5% 72.8% 91.5% 88.8% 2.418
Alliance Govt. Sec. (LT) (G) Gilt GiltL 93.5% 79.7% 92.6% 93.5% 2.474
Birla Gilt Plus (PF Plan) (G) Gilt GiltL 90.6% 71.6% 90.3% 89.0% 2.494
Tata Gilt Secu Fund B (App) Gilt GiltL 93.6% 68.2% 93.5% 92.8% 2.592
Templeton India Childrens Asset Plan (G) Income (Debt) GiltL 92.6% 88.2% 88.4% 86.3% 2.618
Cangilt PGS (G) Gilt GiltL 87.2% 80.9% 86.2% 86.3% 2.952
ING Income Portfolio (G) Income (Debt) GiltL 88.7% 86.8% 85.4% 86.2% 3.000
LICMF Govt. Sec. Fund (G) Gilt GiltL 82.8% 77.9% 82.5% 82.6% 3.016
Magnum Gilt Long Term Plan (G) Gilt GiltL 95.2% 83.8% 95.1% 94.9% 3.123
Zurich (I) Sov Gilt (IP) (G) Gilt GiltL 86.1% 78.5% 82.7% 85.0% 3.163
Chola Gilt Investment Plan (G) Gilt GiltL 88.3% 81.2% 87.2% 89.8% 3.198
Dundee Sovereign Trust (G) Gilt GiltL 81.4% 66.1% 81.3% 81.4% 3.238
PNB Debt Fund (G) Income (Debt) GiltL 86.4% 71.8% 86.4% 74.5% 3.382
K Gilt Serial 2019 (G) Gilt GiltL 85.3% 57.1% 85.7% 85.1% 3.673
UTI G-Sec Fund (G) Gilt GiltL 77.9% 70.1% 77.7% 76.9% 3.752
Zurich (I) Sov Gilt (PT) (G) Gilt GiltL 70.5% 58.9% 65.9% 66.3% 4.668
Escorts Gilt Fund (G) Gilt GiltL 41.3% 37.8% 40.8% 43.0% 7.259
Pru ICICI Gilt - Treasury Plan (G) Gilt GiltS 93.6% 67.9% 93.6% 74.8% 2.104
K Gilt (Saving) (G) Gilt GiltS 89.3% 80.4% 84.5% 84.9% 2.463
Alliance Govt. Sec. (ST) (G) Gilt GiltS 89.8% 71.4% 89.4% 76.3% 3.013
DSP-ML Govt. Sec. Fund B (G) Gilt GiltS 84.5% 51.0% 84.6% 58.4% 3.039
K Gilt Serial 2007 (G) Gilt GiltS 87.6% 80.3% 90.4% 84.5% 3.167
K Gilt Serial 2003 (G) Gilt GiltS 62.7% 29.8% 63.2% 36.4% 3.601
Chola Gilt - Saving Plan (G) Gilt GiltS 76.3% 43.1% 76.5% 48.6% 3.658
K Gilt Serial 2005 (G) Gilt GiltS 67.1% 47.5% 73.6% 51.5% 3.853
Sundaram Gilt Fund (G) Gilt GiltS 79.3% 51.4% 79.3% 55.9% 3.891
Birla Gilt Plus (Liquid Plan)(G) Gilt GiltS 77.4% 61.2% 76.9% 66.3% 3.912
Magnum Gilt - Short Term Plan (G) Gilt GiltS 80.0% 57.3% 80.3% 61.6% 5.473
Tata Income Fund (HDiv) Income (Debt) GiltS 51.7% 48.5% 41.8% 44.6% 5.562
Zurich (I) Sov Gilt (SP) (G) Gilt GiltS 38.0% 38.0% 1.8% 1.7% 7.443
HDFC Income Fund (G) Income (Debt) Income 98.1% 93.4% 98.3% 97.3% 1.197
K Bond (Wholesale Plan) (G) Income (Debt) Income 97.9% 93.8% 97.8% 96.9% 1.296
K Bond (Deposit Plan) (G) Income (Debt) Income 97.9% 93.7% 97.8% 96.9% 1.298
Grindlays Super Saver Income Fund (G) Income (Debt) Income 97.2% 91.9% 97.4% 96.6% 1.446
Pru ICICI Income Plan (G) Income (Debt) Income 97.9% 93.2% 97.7% 96.4% 1.493
Name
Traditional
Category
Moodys/
ICRA Cluster
R2
(Mix)
R2
(Mix/PC) R2(PC) R2(Cat)
Distance to
Cluster
Centre
Moody s Special Comment 15
Sundaram Bond Saver (G) Income (Debt) Income 96.1% 87.5% 96.1% 95.4% 1.518
IL&FS Bond Fund (G) Income (Debt) Income 95.4% 90.7% 95.3% 94.1% 1.664
Birla Income Plus B Income (Debt) Income 95.1% 92.6% 94.5% 94.1% 1.735
IDBI-PRINCIPAL Income (G) Income (Debt) Income 97.4% 93.1% 96.7% 96.1% 1.837
SUN F&C Money Value Fund (Bond ) (G) Income (Debt) Income 93.0% 86.1% 93.2% 92.2% 1.978
Templeton India Income Builder Account (G) Income (Debt) Income 93.4% 87.0% 94.2% 94.6% 2.001
Zurich (I) High Interest Fund (G) Income (Debt) Income 92.1% 87.5% 92.2% 90.2% 2.026
Templeton India Income Fund (G) Income (Debt) Income 93.7% 91.7% 92.3% 89.9% 2.030
Alliance Income Fund (G) Income (Debt) Income 92.7% 86.1% 92.7% 92.5% 2.352
Magnum Income Fund (G) Income (Debt) Income 92.7% 88.0% 92.8% 91.4% 2.387
JM Income Fund (G) Income (Debt) Income 94.9% 94.4% 89.7% 88.8% 2.543
Chola Triple Ace (G) Income (Debt) Income 94.4% 89.3% 92.9% 91.3% 2.610
DSP-ML Bond Fund (G) Income (Debt) Income 92.8% 92.0% 87.8% 86.6% 2.686
Reliance Income Fund (G) Income (Debt) Income 88.1% 84.6% 87.1% 87.7% 2.830
SUN F&C Monthly Income Plan (G) Monthly Income Plan Income 87.4% 86.1% 78.2% 78.2% 3.383
LICMF Bond Fund (G) Income (Debt) Income 77.5% 67.6% 76.9% 76.1% 3.595
Tata Income Fund (Appreciation) Income (Debt) Income 79.5% 76.8% 78.3% 76.6% 3.674
Templeton Monthly Income Plan (QDiv) Monthly Income Plan Income 79.6% 76.3% 76.6% 63.9% 3.835
FT India Monthly Income Plan (G) Monthly Income Plan Income 83.0% 80.3% 72.4% 85.6% 4.472
Templeton Monthly Income Plan (MDiv) Monthly Income Plan Income 53.6% 50.9% 52.1% 49.9% 5.121
Sundaram Growth Fund Equity Diversified Index 95.1% 93.3% 94.8% 94.8% 2.100
Sundaram Tax Saver Equity Tax Saving Index 95.4% 93.3% 95.2% 94.1% 2.295
K 30 Equity Diversified Index 94.2% 91.1% 94.0% 91.1% 2.443
Canbonus Equity Diversified Index 96.2% 94.6% 95.5% 95.7% 2.490
Templeton India Growth Fund Equity Diversified Index 93.2% 90.1% 93.0% 91.5% 2.535
DSP-ML Equity Fund Equity Diversified Index 95.0% 91.4% 94.9% 93.3% 2.697
IDBI-PRINCIPAL Equity (G) Equity Diversified Index 92.4% 86.5% 92.4% 89.0% 2.722
Zurich (I) Top 200 Fund (G) Equity Diversified Index 92.2% 87.0% 92.1% 89.5% 2.731
Canglobal Equity Diversified Index 93.8% 92.5% 93.0% 92.9% 2.826
UTI Grandmaster 93 Equity Diversified Index 93.6% 89.2% 93.5% 91.4% 2.898
Pru ICICI Growth (G) Equity Diversified Index 94.5% 92.2% 93.9% 92.6% 2.928
HDFC Growth Fund (G) Equity Diversified Index 92.6% 89.9% 91.9% 89.7% 2.928
JM Equity Fund (D) Equity Diversified Index 90.7% 89.8% 89.9% 90.5% 2.960
JM Equity Fund (G) Equity Diversified Index 92.8% 91.9% 92.0% 92.2% 2.995
IDBI-PRINCIPAL Growth (G) Equity Diversified Index 91.7% 88.0% 91.3% 89.2% 3.011
UTI Brand Value Fund Equity Sector Index 90.3% 86.0% 90.3% 79.5% 3.097
BOB ELSS 96 Equity Tax Saving Index 91.7% 90.8% 89.1% 90.7% 3.139
Franklin India Growth Fund Equity Diversified Index 94.6% 93.2% 92.6% 91.7% 3.247
Tata Pure Equity Fund Equity Diversified Index 91.9% 88.8% 90.9% 90.1% 3.247
LICMF Equity Fund Equity Diversified Index 89.1% 86.3% 87.9% 88.1% 3.282
Zurich (I) Tax Saver (G) Equity Tax Saving Index 90.5% 88.2% 89.9% 89.1% 3.290
UTI Master Plus 91 Equity Diversified Index 90.7% 87.2% 90.7% 90.2% 3.307
UTI Mastergain 92 Equity Diversified Index 87.8% 83.1% 87.8% 87.0% 3.383
IDBI-PRINCIPAL Tax Savings Fund Equity Tax Saving Index 90.9% 86.7% 90.9% 88.7% 3.467
IL&FS Growth & Value Fund (G) Equity Diversified Index 89.6% 86.2% 89.4% 88.3% 3.583
Magnum Equity Fund Equity Diversified Index 92.6% 91.6% 89.3% 90.8% 3.631
UTI Equity Tax Savings Plan Equity Tax Saving Index 88.6% 85.7% 86.7% 83.6% 3.641
Zurich (I) Equity Fund (G) Equity Diversified Index 90.6% 87.8% 90.0% 88.8% 3.694
Canganga Balanced Index 93.4% 93.3% 88.6% 90.6% 3.861
DSP-ML Opportunities Fund (G) Equity Sector Index 91.6% 87.5% 92.0% 82.9% 3.933
Franklin India Bluechip Fund (G) Equity Diversified Index 89.9% 82.8% 89.9% 86.1% 3.971
Escorts Tax Plan (G) Equity Tax Saving Index 78.0% 73.2% 77.9% 75.4% 4.048
Birla Advantage Fund (G) Equity Diversified Index 89.0% 88.4% 86.5% 87.8% 4.136
UTI Mastergrowth 93 Equity Diversified Index 87.5% 81.8% 87.5% 84.6% 4.169
LIC Dhanasamriddhi Equity Diversified Index 83.4% 79.1% 83.1% 82.4% 4.258
Name
Traditional
Category
Moodys/
ICRA Cluster
R2
(Mix)
R2
(Mix/PC) R2(PC) R2(Cat)
Distance to
Cluster
Centre
16 Moody s Special Comment
Pru ICICI Tax Plan (G) Equity Tax Saving Index 92.4% 91.3% 91.6% 93.8% 4.367
Tata Tax Saving Fund Equity Tax Saving Index 83.2% 82.9% 78.5% 77.7% 4.512
Tata Select Equity Fund Equity Sector Index 82.0% 79.8% 79.7% 64.0% 4.682
Alliance Basic Industries (G) Equity Sector Index 81.9% 77.7% 80.5% 61.0% 4.888
GIC Growth Plus II Equity Diversified Index 78.8% 76.5% 77.6% 77.2% 4.978
UTI Index Select Equity Fund Equity Diversified Index 80.5% 79.8% 78.0% 79.4% 5.202
Magnum FMCG Fund Equity Sector Index 68.8% 68.9% 64.4% 62.9% 5.415
UTI Petro Fund Equity Sector Index 42.7% 37.1% 42.5% 31.9% 10.606
Birla Cash Plus (G) Money Market Liquid 88.9% 15.0% 86.0% 84.2% 3.891
JM High Liquidity Fund (G) Money Market Liquid 82.1% 11.4% 81.0% 82.2% 4.317
DSP-ML Liquidity Fund (G) Money Market Liquid 84.9% 3.3% 84.9% 80.7% 4.343
Zurich (I) Liquidity Fund (SP) (G) Money Market Liquid 72.3% 1.7% 72.3% 69.2% 4.832
SUN F&C Money Value Fund (Liquid ) Money Market Liquid 66.7% 1.9% 66.7% 62.2% 4.914
Templeton India Treasury Mgmt Account (G) Money Market Liquid 66.8% 1.5% 63.7% 60.9% 5.266
Alliance Cash Manager (G) Money Market Liquid 86.0% 2.1% 86.0% 81.1% 5.997
K Liquid (G) Money Market Liquid 82.1% 7.9% 81.1% 79.6% 6.161
Magnum Insta Cash Fund (Cash) Money Market Liquid 43.8% 0.1% 43.8% 46.0% 6.307
Zurich (I) Liquidity Fund (IP) (G) Money Market Liquid 74.8% 4.7% 76.0% 72.2% 7.793
IDBI-PRINCIPAL Cash Mgmt - Money at call (G) Money Market Liquid 68.3% 3.2% 68.3% 66.0% 8.092
HDFC Liquid Fund (G) Money Market Liquid 80.3% 4.7% 80.5% 78.4% 8.174
Templeton India Liquid Fund (G) Money Market Liquid 50.8% 4.3% 50.6% 50.0% 9.032
UTI Money Market Fund (Growth) Money Market Liquid 29.5% 1.4% 29.5% 36.5% 10.598
Pru ICICI Liquid Plan (G) Money Market Liquid 87.0% 7.6% 87.0% 89.4% 10.913
Chola Liquid (Cumulative) Money Market Liquid 51.8% 1.8% 51.8% 52.2% 13.314
Grindlays Cash Fund (G) Money Market Liquid 73.8% 3.2% 73.8% 74.9% 13.461
Reliance Liquid Fund Treasury Plan (G) Money Market Liquid 52.9% 12.1% 47.7% 53.3% 15.590
Sundaram Money Fund (G) Money Market Liquid 22.8% 0.2% 22.8% 27.0% 17.537
IDBI-PRINCIPAL Cash Mgmt - Liquid Fund (G) Money Market Liquid 62.7% 0.4% 62.7% 65.3% 18.764
ING Treasury Portfolio (G) Money Market Liquid 36.8% 0.5% 33.5% 38.3% 23.820
Pru ICICI Monthly Income Plan (G) Monthly Income Plan MIP 73.4% 60.9% 71.7% 66.0% 4.064
HDFC Childrens Gift Fund (Sav Plan) Income (Debt) MIP 70.7% 57.3% 69.4% 56.4% 4.110
Templeton Monthly Income Plan (G) Monthly Income Plan MIP 90.6% 85.4% 85.8% 83.8% 4.301
Alliance Monthly Income (G) Monthly Income Plan MIP 88.3% 83.2% 81.5% 81.2% 4.381
Templeton Monthly Income Plan (HDiv) Monthly Income Plan MIP 81.4% 75.8% 76.7% 78.7% 4.619
Chola Freedom Income - Short Term Fund (G) Income (Debt) MIP 58.5% 50.3% 50.7% 42.5% 4.799
Magnum Monthly Income Plan (G) Monthly Income Plan MIP 47.3% 24.0% 47.5% 39.0% 4.817
Birla Monthly Income Plan (G) Monthly Income Plan MIP 70.9% 69.5% 64.3% 66.0% 5.221
UTI Bond Fund (Growth) Income (Debt) MIP 47.3% 41.6% 45.0% 36.6% 5.325
Dundee PSU Bond Fund (G) Income (Debt) MIP 24.8% 24.8% 20.6% 15.9% 5.707
Dundee Corp. Bond Fund (G) Income (Debt) MIP 38.5% 32.6% 29.9% 19.2% 6.379
Reliance Monthly Income Plan(G) Monthly Income Plan MIP 29.4% 29.4% 13.6% 20.0% 7.657
UTI Mahila Unit Scheme (G) Income (Debt) MIP 37.2% 37.2% 18.4% 10.1% 9.471
Pru ICICI Gilt - Treasury I Year Plus Plan (G) Gilt MIP 9.0% 9.0% 5.3% 4.0% 10.790
Dundee Liquidity Fund (G) Money Market MM 40.7% 38.7% 21.6% 43.0% 6.931
Tata Liquid Fund (Appreciation) Money Market MM 48.1% 35.6% 27.4% 34.4% 6.993
Escorts Income Plan (G) Income (Debt) MM 74.0% 16.7% 93.7% 14.1% 9.035
Grindlays Super Saver Income - STP (G) Income (Debt) MM 32.0% 32.0% 4.0% 27.5% 15.449
UTI Pharma & Healthcare Fund Equity Sector Pharm 93.3% 56.9% 93.3% 43.9% 2.115
Franklin Pharma Fund (G) Equity Sector Pharm 90.2% 51.4% 90.0% 39.6% 2.345
Alliance Buy India Fund (G) Equity Sector Pharm 83.2% 58.4% 79.9% 57.4% 3.199
Magnum Pharma Fund Equity Sector Pharm 87.7% 52.3% 87.6% 43.2% 3.258
DSP-ML Technology.Com (G) Equity Sector Tech 96.9% 94.9% 96.3% 93.4% 3.390
Pru ICICI Technology Fund (G) Equity Sector Tech 97.0% 93.7% 96.7% 91.2% 4.234
IL&FS eCOM Fund (G) Equity Sector Tech 96.9% 93.9% 97.1% 87.9% 4.248
SUN F&C Emerging Tech. (G) Equity Sector Tech 95.8% 94.7% 94.6% 90.2% 4.260
Name
Traditional
Category
Moodys/
ICRA Cluster
R2
(Mix)
R2
(Mix/PC) R2(PC) R2(Cat)
Distance to
Cluster
Centre
Moody s Special Comment 17
K Tech Equity Sector Tech 95.6% 93.0% 95.3% 82.8% 4.542
Franklin Internet Opportunities Fund (G) Equity Sector Tech 94.2% 92.2% 93.8% 84.4% 4.938
Magnum IT Fund Equity Sector Tech 93.9% 90.0% 93.8% 81.5% 5.327
Birla IT Fund (G) Plan B Equity Sector Tech 91.2% 83.3% 91.2% 79.0% 7.369
UTI Software Fund Equity Sector TechA 96.3% 90.6% 96.2% 83.2% 4.292
Alliance New Millennium (G) Equity Sector TechA 94.2% 90.6% 94.2% 80.1% 4.490
ING Growth Sectors Portfolio (G) Equity Diversified TechA 93.1% 84.6% 92.9% 64.7% 5.217
Franklin Infotech Fund (G) Equity Sector TechA 94.6% 93.0% 94.1% 78.8% 5.938
Reliance Growth Fund (G) Equity Diversified Val 86.9% 74.7% 86.6% 77.9% 4.390
Franklin India Prima Fund (G) Equity Diversified Val 86.6% 78.1% 86.1% 81.6% 5.059
Taurus Libra Leap Equity Diversified Val 85.7% 74.4% 83.4% 76.8% 5.060
GIC Fortune 94 Equity Diversified Val 87.3% 86.4% 82.7% 87.1% 5.106
Taurus Star Share Equity Diversified Val 85.7% 70.4% 85.6% 74.7% 5.243
Magnum Tax Gain Scheme Equity Tax Saving Val 87.6% 80.3% 85.8% 82.6% 5.384
Reliance Vision Fund Equity Diversified Val 81.2% 68.2% 81.1% 71.7% 5.398
Taurus Discovery Fund Equity Diversified Val 74.0% 55.4% 74.0% 59.4% 5.839
Magnum Contra Fund Equity Sector Val 82.1% 81.3% 77.3% 65.2% 5.945
Magnum Multiplier Plus Equity Diversified Val 87.0% 79.0% 85.8% 80.1% 6.311
SUN F&C Resurgent IEF (G) Equity Diversified Val 79.5% 70.3% 79.4% 74.9% 6.448
Taurus Libra Tax Shield Equity Tax Saving Val 72.5% 53.9% 72.5% 60.3% 7.613
Name
Traditional
Category
Moodys/
ICRA Cluster
R2
(Mix)
R2
(Mix/PC) R2(PC) R2(Cat)
Distance to
Cluster
Centre
18 Moody s Special Comment
Appendix 2
Figure 13. Correlation and Distances between Traditional Category Benchmarks and Moodys/ ICRA
Management Style Indices to Local Equity Market Indices
BSE DOLLEX BSE SENSEX BSE100 BSE200 BSE500
Corr. Dist Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 0.95 0.28 0.92 0.27 0.96 0.26 0.89 0.41 0.96 0.27
Equity Diversified 0.95 0.17 0.92 0.22 0.96 0.16 0.90 0.30 0.96 0.15
Equity Tax Saving 0.94 0.20 0.90 0.25 0.94 0.19 0.91 0.29 0.95 0.17
Equity Sector 0.92 0.23 0.89 0.27 0.94 0.20 0.87 0.34 0.93 0.22
Monthly Income Plan 0.71 0.53 0.64 0.51 0.69 0.52 0.72 0.64 0.72 0.53
Income (Debt) 0.40 0.55 0.31 0.53 0.37 0.53 0.43 0.65 0.40 0.55
Gilt 0.29 0.55 0.21 0.53 0.28 0.53 0.36 0.64 0.29 0.55
Money Market 0.24 0.57 0.18 0.54 0.22 0.55 0.22 0.68 0.25 0.57
Moodys/ICRA
Dvrs 0.93 0.21 0.91 0.25 0.96 0.16 0.85 0.36 0.94 0.20
Val 0.87 0.33 0.81 0.41 0.87 0.34 0.96 0.20 0.90 0.30
BalD 0.90 0.34 0.89 0.32 0.91 0.31 0.85 0.46 0.91 0.33
Pharm 0.68 0.42 0.64 0.43 0.65 0.42 0.75 0.46 0.68 0.42
Bal 0.94 0.27 0.91 0.26 0.93 0.26 0.90 0.39 0.95 0.26
Index 0.96 0.17 0.93 0.20 0.96 0.16 0.87 0.34 0.96 0.16
TechA 0.80 0.67 0.78 0.70 0.85 0.63 0.71 0.73 0.80 0.67
Tech 0.82 0.54 0.80 0.58 0.87 0.51 0.76 0.59 0.83 0.53
MIP 0.72 0.54 0.64 0.52 0.69 0.52 0.71 0.64 0.72 0.54
Income 0.37 0.55 0.28 0.53 0.34 0.53 0.41 0.65 0.37 0.55
GiltS 0.13 0.57 0.08 0.54 0.12 0.55 0.19 0.67 0.12 0.57
GiltL 0.30 0.54 0.22 0.53 0.29 0.53 0.38 0.63 0.31 0.54
Enhanced Cash 0.24 0.57 0.17 0.54 0.22 0.55 0.21 0.68 0.25 0.57
MM 0.39 0.57 0.38 0.54 0.40 0.55 0.29 0.67 0.39 0.57
CmpEq 0.95 0.19 0.92 0.22 0.96 0.16 0.90 0.32 0.96 0.17
CmpFI 0.35 0.55 0.27 0.53 0.34 0.53 0.41 0.65 0.36 0.55
CmpBal 0.94 0.28 0.92 0.27 0.94 0.26 0.90 0.40 0.95 0.27
CmpMM 0.40 0.57 0.35 0.54 0.39 0.55 0.32 0.68 0.40 0.57
Moody s Special Comment 19
Figure 14. Correlation and Distances between traditional category benchmarks and Moodys/ ICRA
Management Style Indices to Local Equity Market Indices
CRISIL 200 MSCI INDIA GROWTH MSCI INDIA VALUE S&P 500/CNX
Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 0.89 0.41 0.82 0.40 0.92 0.29 0.96 0.26
Equity Diversified 0.90 0.30 0.81 0.37 0.92 0.22 0.96 0.15
Equity Tax Saving 0.91 0.29 0.80 0.38 0.91 0.24 0.96 0.17
Equity Sector 0.87 0.34 0.89 0.29 0.83 0.33 0.94 0.19
Monthly Income Plan 0.72 0.64 0.53 0.59 0.66 0.52 0.72 0.53
Income (Debt) 0.43 0.65 0.17 0.61 0.39 0.54 0.40 0.54
Gilt 0.36 0.64 0.09 0.62 0.31 0.53 0.31 0.54
Money Market 0.22 0.68 0.16 0.62 0.21 0.56 0.23 0.57
Moodys/ICRA
Dvrs 0.85 0.36 0.89 0.28 0.86 0.31 0.96 0.16
Val 0.96 0.20 0.70 0.51 0.85 0.36 0.90 0.30
BalD 0.85 0.46 0.79 0.43 0.87 0.34 0.92 0.32
Pharm 0.75 0.46 0.56 0.52 0.64 0.44 0.68 0.42
Bal 0.90 0.39 0.78 0.41 0.92 0.27 0.94 0.26
Index 0.87 0.34 0.81 0.37 0.94 0.20 0.96 0.16
TechA 0.71 0.73 0.89 0.57 0.66 0.79 0.85 0.63
Tech 0.76 0.59 0.88 0.46 0.70 0.65 0.86 0.50
MIP 0.71 0.64 0.55 0.59 0.66 0.53 0.72 0.53
Income 0.41 0.65 0.15 0.61 0.37 0.53 0.37 0.54
GiltS 0.19 0.67 -0.02 0.62 0.17 0.55 0.14 0.56
GiltL 0.38 0.63 0.09 0.63 0.32 0.53 0.32 0.54
Liquid 0.21 0.68 0.16 0.62 0.19 0.56 0.23 0.57
MM 0.29 0.67 0.33 0.62 0.38 0.55 0.40 0.56
CmpEq 0.90 0.32 0.84 0.34 0.90 0.24 0.97 0.16
CmpFI 0.41 0.65 tht0.14 0.61 0.36 0.54 0.36 0.54
CmpBal 0.90 0.40 0.79 0.41 0.92 0.28 0.94 0.27
CmpMM 0.32 0.68 0.31 0.62 0.36 0.56 0.40 0.57
20 Moody s Special Comment
Figure 15. Correlation And Distances Between Traditional Category Benchmarks and Moodys/ ICRA
Management Style Indices to Traditional Equity Category Benchmarks
Balanced Equity Diversified ELSS
Equity
Sector
Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 1.00 0.00 0.99 0.22 0.99 0.24 0.95 0.28
Equity Diversified 0.99 0.22 1.00 0.00 0.99 0.06 0.96 0.16
Equity Tax Saving 0.99 0.24 0.99 0.06 1.00 0.00 0.96 0.16
Equity Sector 0.95 0.28 0.96 0.16 0.96 0.16 1.00 0.00
Monthly Income Plan 0.79 0.29 0.74 0.50 0.77 0.52 0.72 0.53
Income (Debt) 0.45 0.31 0.39 0.52 0.42 0.54 0.35 0.55
Gilt 0.36 0.31 0.30 0.52 0.34 0.54 0.28 0.55
Money Market 0.26 0.33 0.25 0.54 0.25 0.57 0.25 0.57
Moodys/ICRA
Dvrs 0.96 0.27 0.97 0.15 0.97 0.14 0.99 0.10
Val 0.94 0.38 0.96 0.22 0.96 0.21 0.91 0.28
BalD 0.96 0.09 0.95 0.28 0.95 0.31 0.91 0.33
Pharm 0.74 0.28 0.74 0.36 0.74 0.38 0.72 0.40
Bal 0.99 0.05 0.99 0.19 0.99 0.22 0.94 0.27
Index 0.99 0.21 0.99 0.06 0.99 0.09 0.94 0.19
TechA 0.80 0.79 0.81 0.67 0.82 0.65 0.92 0.55
Tech 0.85 0.65 0.85 0.52 0.86 0.50 0.95 0.39
MIP 0.78 0.30 0.73 0.51 0.76 0.53 0.72 0.54
Income 0.43 0.31 0.36 0.52 0.40 0.54 0.33 0.55
GiltS 0.21 0.33 0.14 0.54 0.19 0.56 0.12 0.57
GiltL 0.37 0.31 0.31 0.51 0.35 0.53 0.29 0.55
Liquid 0.24 0.33 0.23 0.54 0.23 0.57 0.23 0.57
MM 0.40 0.33 0.39 0.54 0.40 0.56 0.39 0.57
CmpEq 0.99 0.17 0.99 0.07 1.00 0.09 0.98 0.13
CmpFI 0.42 0.31 0.36 0.52 0.40 0.54 0.34 0.55
CmpBal 0.99 0.04 0.99 0.21 0.99 0.23 0.94 0.28
CmpMM 0.40 0.33 0.39 0.54 0.40 0.57 0.39 0.57
Moody s Special Comment 21
Figure 16. Correlation and Distances between Traditional Category Benchmarks and Moodys/ ICRA
Management Style Indices to Traditional Fixed- Income Category Benchmarks
MIP Income(debt) Gilt
Money Market
Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 0.79 0.29 0.45 0.31 0.36 0.31 0.26 0.33
Equity Diversified 0.74 0.50 0.39 0.52 0.30 0.52 0.25 0.54
Equity Tax Saving 0.77 0.52 0.42 0.54 0.34 0.54 0.25 0.57
Equity Sector 0.72 0.53 0.35 0.55 0.28 0.55 0.25 0.57
Monthly Income Plan 1.00 0.00 0.84 0.04 0.70 0.10 0.32 0.06
Income (Debt) 0.84 0.04 1.00 0.00 0.94 0.06 0.22 0.07
Gilt 0.70 0.10 0.94 0.06 1.00 0.00 0.19 0.13
Money Market 0.32 0.06 0.22 0.07 0.19 0.13 1.00 0.00
Moodys/ICRA
Dvrs 0.72 0.54 0.35 0.56 0.26 0.56 0.24 0.58
Val 0.72 0.63 0.38 0.65 0.32 0.64 0.23 0.67
BalD 0.79 0.25 0.48 0.27 0.41 0.27 0.26 0.29
Pharm 0.59 0.38 0.33 0.39 0.27 0.40 0.17 0.41
Bal 0.77 0.32 0.43 0.33 0.33 0.34 0.26 0.36
Index 0.74 0.49 0.40 0.51 0.31 0.51 0.25 0.53
TechA 0.60 1.00 0.26 1.02 0.20 1.01 0.21 1.03
Tech 0.66 0.86 0.29 0.88 0.23 0.88 0.22 0.90
MIP 0.97 0.02 0.77 0.05 0.60 0.10 0.34 0.05
Income 0.83 0.05 1.00 0.01 0.95 0.06 0.22 0.08
GiltS 0.59 0.05 0.84 0.04 0.89 0.08 0.10 0.06
GiltL 0.71 0.14 0.94 0.11 1.00 0.05 0.20 0.17
Liquid 0.28 0.06 0.19 0.07 0.17 0.13 0.99 0.00
MM 0.47 0.05 0.42 0.07 0.35 0.12 0.29 0.01
CmpEq 0.75 0.45 0.40 0.47 0.31 0.47 0.25 0.50
CmpFI 0.79 0.05 0.98 0.02 0.99 0.05 0.22 0.08
CmpBal 0.77 0.30 0.44 0.32 0.34 0.32 0.26 0.34
CmpMM 0.47 0.06 0.38 0.07 0.33 0.13 0.83 0.00
22 Moody s Special Comment
Figure 17. Correlation and Distances between Traditional Category Benchmarks and Moodys/
ICRA Management Style Indices to Moodys/ ICRA Equity Management Style Indices
Dvrs Val BalD Pharm Bal Index TechA Tech
Corr Dist Corr Dist Corr Dist Corr Dist Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 0.96 0.27 0.94 0.38 0.96 0.09 0.74 0.28 0.99 0.05 0.99 0.21 0.80 0.79 0.85 0.65
Equity Diversified 0.97 0.15 0.96 0.22 0.95 0.28 0.74 0.36 0.99 0.19 0.99 0.06 0.81 0.67 0.85 0.52
Equity Tax Saving 0.97 0.14 0.96 0.21 0.95 0.31 0.74 0.38 0.99 0.22 0.99 0.09 0.82 0.65 0.86 0.50
Equity Sector 0.99 0.10 0.91 0.28 0.91 0.33 0.72 0.40 0.94 0.27 0.94 0.19 0.92 0.55 0.95 0.39
Monthly Income Plan 0.72 0.54 0.72 0.63 0.79 0.25 0.59 0.38 0.77 0.32 0.74 0.49 0.60 1.00 0.66 0.86
Income (Debt) 0.35 0.56 0.38 0.65 0.48 0.27 0.33 0.39 0.43 0.33 0.40 0.51 0.26 1.02 0.29 0.88
Gilt 0.26 0.56 0.32 0.64 0.41 0.27 0.27 0.40 0.33 0.34 0.31 0.51 0.20 1.01 0.23 0.88
Money Market 0.24 0.58 0.23 0.67 0.26 0.29 0.17 0.41 0.26 0.36 0.25 0.53 0.21 1.03 0.22 0.90
Moodys/ICRA
Dvrs 1.00 0.00 0.90 0.29 0.91 0.34 0.70 0.42 0.94 0.27 0.96 0.17 0.92 0.55 0.94 0.42
Val 0.90 0.29 1.00 0.00 0.91 0.43 0.74 0.47 0.94 0.36 0.93 0.27 0.75 0.68 0.81 0.53
BalD 0.91 0.34 0.91 0.43 1.00 0.00 0.66 0.31 0.94 0.13 0.94 0.28 0.77 0.83 0.83 0.68
Pharm 0.70 0.42 0.74 0.47 0.66 0.31 1.00 0.00 0.78 0.26 0.73 0.37 0.52 0.89 0.55 0.76
Bal 0.94 0.27 0.94 0.36 0.94 0.13 0.78 0.26 1.00 0.00 0.99 0.19 0.75 0.80 0.80 0.65
Index 0.96 0.17 0.93 0.27 0.94 0.28 0.73 0.37 0.99 0.19 1.00 0.00 0.79 0.69 0.83 0.55
TechA 0.92 0.55 0.75 0.68 0.77 0.83 0.52 0.89 0.75 0.80 0.79 0.69 1.00 0.00 0.97 0.25
Tech 0.94 0.42 0.81 0.53 0.83 0.68 0.55 0.76 0.80 0.65 0.83 0.55 0.97 0.25 1.00 0.00
MIP 0.73 0.54 0.69 0.64 0.76 0.26 0.62 0.38 0.76 0.32 0.74 0.50 0.60 1.00 0.65 0.87
Income 0.33 0.56 0.36 0.65 0.46 0.27 0.31 0.39 0.40 0.33 0.38 0.51 0.25 1.01 0.28 0.88
GiltS 0.12 0.57 0.14 0.67 0.24 0.28 0.19 0.40 0.19 0.35 0.17 0.53 0.03 1.03 0.06 0.90
GiltL 0.27 0.55 0.33 0.63 0.42 0.27 0.27 0.40 0.34 0.34 0.33 0.50 0.21 1.01 0.24 0.87
Liquid 0.22 0.58 0.21 0.67 0.23 0.29 0.15 0.41 0.23 0.36 0.23 0.53 0.20 1.03 0.21 0.90
MM 0.41 0.57 0.34 0.67 0.39 0.29 0.19 0.41 0.38 0.35 0.40 0.53 0.38 1.03 0.38 0.90
CmpEq 0.98 0.13 0.95 0.26 0.95 0.24 0.74 0.34 0.98 0.16 0.99 0.09 0.86 0.66 0.89 0.51
CmpFI 0.33 0.56 0.37 0.65 0.46 0.27 0.31 0.39 0.40 0.34 0.38 0.51 0.25 1.01 0.28 0.88
CmpBal 0.94 0.28 0.94 0.37 0.96 0.11 0.77 0.26 1.00 0.02 0.99 0.20 0.76 0.80 0.81 0.65
CmpMM 0.40 0.58 0.35 0.67 0.39 0.29 0.21 0.41 0.39 0.36 0.40 0.53 0.37 1.03 0.37 0.90
Moody s Special Comment 23
Figure 18. Correlation and Distances between Traditional Category Benchmarks and Moody' s/ ICRA
Management Style Indices to Moody' s/ ICRA Fixed- Income Management Style Indices
MIP Income GiltS GiltL Liquid MM
Corr Dist Corr Dist Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 0.78 0.30 0.43 0.31 0.21 0.33 0.37 0.31 0.24 0.33 0.40 0.33
Equity Diversified 0.73 0.51 0.36 0.52 0.14 0.54 0.31 0.51 0.23 0.54 0.39 0.54
Equity Tax Saving 0.76 0.53 0.40 0.54 0.19 0.56 0.35 0.53 0.23 0.57 0.40 0.56
Equity Sector 0.72 0.54 0.33 0.55 0.12 0.57 0.29 0.55 0.23 0.57 0.39 0.57
Monthly Income Plan 0.97 0.02 0.83 0.05 0.59 0.05 0.71 0.14 0.28 0.06 0.47 0.05
Income (Debt) 0.77 0.05 1.00 0.01 0.84 0.04 0.94 0.11 0.19 0.07 0.42 0.07
Gilt 0.60 0.10 0.95 0.06 0.89 0.08 1.00 0.05 0.17 0.13 0.35 0.12
Money Market 0.34 0.05 0.22 0.08 0.10 0.06 0.20 0.17 0.99 0.00 0.29 0.01
Moodys/ICRA
Dvrs 0.73 0.54 0.33 0.56 0.12 0.57 0.27 0.55 0.22 0.58 0.41 0.57
Val 0.69 0.64 0.36 0.65 0.14 0.67 0.33 0.63 0.21 0.67 0.34 0.67
BalD 0.76 0.26 0.46 0.27 0.24 0.28 0.42 0.27 0.23 0.29 0.39 0.29
Pharm 0.62 0.38 0.31 0.39 0.19 0.40 0.27 0.40 0.15 0.41 0.19 0.41
Bal 0.76 0.32 0.40 0.33 0.19 0.35 0.34 0.34 0.23 0.36 0.38 0.35
Index 0.74 0.50 0.38 0.51 0.17 0.53 0.33 0.50 0.23 0.53 0.40 0.53
TechA 0.60 1.00 0.25 1.01 0.03 1.03 0.21 1.01 0.20 1.03 0.38 1.03
Tech 0.65 0.87 0.28 0.88 0.06 0.90 0.24 0.87 0.21 0.90 0.38 0.90
MIP 1.00 0.00 0.75 0.05 0.52 0.05 0.59 0.15 0.30 0.05 0.47 0.04
Income 0.75 0.05 1.00 0.00 0.84 0.05 0.94 0.10 0.18 0.08 0.41 0.08
GiltS 0.52 0.05 0.84 0.05 1.00 0.00 0.86 0.13 0.07 0.06 0.24 0.06
GiltL 0.59 0.15 0.94 0.10 0.86 0.13 1.00 0.00 0.17 0.17 0.36 0.17
Liquid 0.30 0.05 0.18 0.08 0.07 0.06 0.17 0.17 1.00 0.00 0.24 0.01
MM 0.47 0.04 0.41 0.08 0.24 0.06 0.36 0.17 0.24 0.01 1.00 0.00
CmpEq 0.75 0.46 0.37 0.47 0.16 0.49 0.32 0.47 0.23 0.50 0.40 0.49
CmpFI 0.70 0.06 0.98 0.02 0.88 0.04 0.99 0.10 0.19 0.08 0.39 0.08
CmpBal 0.77 0.31 0.41 0.32 0.20 0.34 0.36 0.33 0.24 0.34 0.38 0.34
CmpMM 0.49 0.05 0.37 0.08 0.19 0.06 0.34 0.17 0.80 0.00 0.77 0.01
24 Moody s Special Comment
Appendix 3
Moodys/ICRA Management Style Category Definitions
The Equity Diversified management style category reflects mutual fund schemes that have been managed in a similar
way and that focus primarily on investing in well established companies with the objective of producing a capital
appreciation rather than a flow of dividends.
The Diversified Value management style category reflects mutual fund schemes that have been managed in a similar
way and that focus primarily on investing in securities that are considered undervalued with the objective of producing
capital gains.
The Balanced Defensive management style category reflects mutual fund schemes that have been managed in a similar
way and that invest in both equity and fixed-income markets with a focus on defensive sectors and fixed-income secu-
rities and with an objective of both paying current income and promoting long-term growth of principal.
The Pharmaceutical management style category reflects mutual fund schemes that have been managed in a similar way
and that focus primarily on investing in securities associated with the pharmaceutical sector with the objective of pro-
ducing returns in line with this specific market segment.
The Balanced management style category reflects mutual fund schemes that have been managed in a similar way and
that focus primarily on investing in both the equity and fixed-income markets with the objective of combining capital
appreciation and a steady stream of income.
The Equity Index management style category reflects mutual fund schemes that have been managed in a similar way
and that invest primarily in equity securities to mirror an established market index.
The Technology management style category reflects mutual fund schemes that have been managed in a similar way
and that focus primarily on investing in securities associated with the technology sector with the objective of producing
returns in line with this specific market segment.
The Technology Aggressive management style category reflects mutual fund schemes that have been managed in a
similar way and that focus primarily on investing in securities associated with the technology and telecommunications
sectors with the objective of producing maximum returns in this specific market segment.
The MIP management style category reflects mutual fund schemes that have been managed in a similar way and that
focus primarily on investing in a mix of money-market and fixed-income securities with the objective of producing a
high level of current income.
The Income management style category reflects mutual fund schemes that have been managed in a similar way and
that focus primarily on investing in fixed-income corporate securities with the objective of producing a high level of
income
The Short-Term Gilt management style category reflects mutual fund schemes that have been managed in a similar
way and that focus primarily on investing in fixed-income government securities with relatively short-term maturity
and are managed with the final objective of producing income.
The Long-Term Gilt management style category reflects mutual fund schemes that have been managed in a similar
way and that focus primarily on investing in fixed-income government securities with relatively long-term maturity
and that are managed with the final objective of producing income.
The Enhanced Cash management style category reflects mutual fund schemes that have been managed in a similar
way and that focus primarily on investing in very short-term maturity cash and money market securities, and that are
managed with the final objective of being very liquid and producing current income.
The Money Market management style category reflects mutual fund schemes that have been managed in a similar way
and that focus primarily on investing in Money Market and very short-term maturity fixed-income securities and that
are managed with the final objective of being very liquid and producing current income.
The Moodys/ICRA Equity Composite management style category aggregates mutual funds in the following eight
Moodys/ICRA indices: Diversified, Diversified Value, Balanced Defensive, Pharmaceutical, Balanced, ?, Technology
and Technology Aggressive.
The Moodys/ICRA Fixed-Income Composite management style category aggregates mutual funds in the following
six Moodys/ICRA indices: MIP, Income, Short-Term Gilt, Long-Term Gilt, Enhanced Cash and Money Market.
The Moodys/ICRA Balanced Composite management style category aggregates mutual funds in the following two
Moodys/ICRA indices: Balanced Defensive and Balanced.
The Moodys/ICRA Money Market Composite management style category aggregates mutual funds in the following
two Moodys/ICRA indices: Enhanced Cash and Money Market.
Moody s Special Comment 25
Figure 19. Correlation and Distances between Traditional Category Benchmarks and Moodys/ ICRA
Management Style Indices to Moodys/ ICRA Composite Management Style Indices
CmpEq CmpFI CmpBal CmpMM
Corr Dist Corr Dist Corr Dist Corr Dist
Traditional Categories
Balanced 0.99 0.17 0.42 0.31 0.99 0.04 0.40 0.33
Equity Diversified 0.99 0.07 0.36 0.52 0.99 0.21 0.39 0.54
Equity Tax Saving 1.00 0.09 0.40 0.54 0.99 0.23 0.40 0.57
Equity Sector 0.98 0.13 0.34 0.55 0.94 0.28 0.39 0.57
Monthly Income Plan 0.75 0.45 0.79 0.05 0.77 0.30 0.47 0.06
Income (Debt) 0.40 0.47 0.98 0.02 0.44 0.32 0.38 0.07
Gilt 0.31 0.47 0.99 0.05 0.34 0.32 0.33 0.13
Money Market 0.25 0.50 0.22 0.08 0.26 0.34 0.83 0.00
Moodys/ICRA
Dvrs 0.98 0.13 0.33 0.56 0.94 0.28 0.40 0.58
Val 0.95 0.26 0.37 0.65 0.94 0.37 0.35 0.67
BalD 0.95 0.24 0.46 0.27 0.96 0.11 0.39 0.29
Pharm 0.74 0.34 0.31 0.39 0.77 0.26 0.21 0.41
Bal 0.98 0.16 0.40 0.34 1.00 0.02 0.39 0.36
Index 0.99 0.09 0.38 0.51 0.99 0.20 0.40 0.53
TechA 0.86 0.66 0.25 1.01 0.76 0.80 0.37 1.03
Tech 0.89 0.51 0.28 0.88 0.81 0.65 0.37 0.90
MIP 0.75 0.46 0.70 0.06 0.77 0.31 0.49 0.05
Income 0.37 0.47 0.98 0.02 0.41 0.32 0.37 0.08
GiltS 0.16 0.49 0.88 0.04 0.20 0.34 0.19 0.06
GiltL 0.32 0.47 0.99 0.10 0.36 0.33 0.34 0.17
Liquid 0.23 0.50 0.19 0.08 0.24 0.34 0.80 0.00
MM 0.40 0.49 0.39 0.08 0.38 0.34 0.77 0.01
CmpEq 1.00 0.00 0.37 0.47 0.98 0.17 0.40 0.49
CmpFI 0.37 0.47 1.00 0.00 0.41 0.32 0.37 0.08
CmpBal 0.98 0.17 0.41 0.32 1.00 0.00 0.39 0.34
CmpMM 0.40 0.49 0.37 0.08 0.39 0.34 1.00 0.00
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28 Moody s Special Comment
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