January 13, 2018

Why Mutual Fund Investors Must Care About This New Benchmark

What’s TRI? It’s something a mutual fund investor should know.

TRI, or Total Return Index, tracks both the capital gains of a scheme and assumes that any cash distribution, such as dividends, are reinvested back into the index. Markets regulator SEBI released a circular on Jan. 4 asking fund houses to benchmark a scheme’s performance against the TRI.

The objective, as highlighted by SEBI, is to help investors compare the performance of a scheme with the benchmark in a fairer manner.

A quick look at the difference between Nifty returns over the last 17 years, compared to the total returns (as per TRI), will suggest that it will become harder for a mutual fund to show significant outperformance versus the benchmark.

“TRI is a good move as it will get fund managers to become more active, and will align us with global market practices,” Leo Puri, managing director at UTI Asset Management, said on this week’s BQMutualFundShow. The total return gives a true and fair picture of the performance of an entity, he said.

Here are edited excerpts from the conversation.

Read more at https://www.bloombergquint.com/mutual-funds/2018/01/13/why-mutual-fund-investors-must-care-about-this-new-benchmark

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