Crisil launches new system for ranking mutual funds

By Our Corporate Reporter

CHENNAI, JULY 9. Credit Rating and Information Services of India (Crisil) launched a novel, scientifically based system for measuring the performance of all types of mutual fund schemes, broadly classified as equity, debt or balanced.

With its composite performance ranking (CPR), Crisil brings to investors an independently designed assessment of the composite performance of the schemes' investments, according to a release.

Crisil's methodology is unique in that it goes beyond the superficial pecking order of schemes ranked by total returns. It weighs such returns with risk factors involved in delivering and sustaining them, such as volatility risk, liquidity risk and diversification risk. Significantly, Crisil does not blindly import these practices from developed international markets: its methodology makes adjustments for the relative imperfections and peculiarities of Indian market conditions.

Consequently, the methodology is not only by far the most superior in the marketplace, but also most appropriate for the Indian markets.

In fact, wherever conventional, including international methodologies that did not factor in Indian market conditions were used, Crisil found glaring distortions in the rankings during pre-launch data runs.

Composite performance rankings cover those mutual fund schemes that are open-ended, have disclosed their net asset values for at least two years (since June 1998) and make a 100 per cent disclosure of their portfolio composition.

These rankings, the first of which are based on the latest data - up to June 30, 2000 - will be updated quarterly. Crisil's first set of CPRs covers 30 schemes, which are expected to number more than 50 in a year from now.

Topping the list in the equity category this time are Birla Advantage Fund and Zurich India Equity Fund. Both have been awarded the rank `Crisil-CPR 1 Open Ended Equity Scheme- General, July-Sep 2000'. The CPR 1 ranking indicates `very good performance' in the category.

In the Debt category, these honours go to Jardine Fleming India Bond Fund and Sundaram Bond Saver. In the Balanced scheme segment, the top slot goes to Alliance '95 Fund.

The Crisil CPR initiative marks a major milestone for Crisil. `In developing and fine-tuning this methodology, the agency extensively interacted with asset management companies and fund marketers, among others,' says Mr. R. Ravimohan, Managing Director of CRISIL.

`Crisil's composite performance rankings would enable mutual funds to provide their investor communities with a credible third party assessment of their composite performance, thereby enhancing investors' ability to take informed decisions.'

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