DATA ANALYSIS AND INTERPRETATION

1. ANALYSIS OF MUTUAL FUND PERFORMANCE

Mutual fund performance can be analyzed through performance measurement ratios which
are use in portfolio analysis. We here are using Treynor, Sharpe, and Jensen ratio to evaluate
mutual funds and rank accordingly. Composite portfolio performance measures have the
flexibility of combining risk and return performance into a single value. The most
commonly used composite measures are: Treynor, Sharpe and Jensen measures. While
Treynor measures only the systematic risk summarized by beta, Sharpe concentrates on total
risk of the mutual fund.

TREYNERS PERFORMANCE INDEX

Treynor (1965) was the first researcher developing a composite measure of portfolio
performance. He measures portfolio risk with beta, and calculates portfolios market risk
premium relative to its beta:

Where:

Ti = Treynors Performance Index

Rp = Portfolios actual return during a specified time period

Rf = Risk-free rate of return during the same period

p = beta of the portfolio

Whenever Rp> Rf and p > 0 a larger T value means a better portfolio for all investors
Regardless of their individual risk preferences. In two cases we may have a negative T
value: when Rp < Rf or when p < 0. If T is negative because Rp < Rf we judge the
portfolio performance as very poor. However, if the negativity of T comes from a negative
beta, funds performance is superb. Finally when Rp- Rf, and p are both negative, T will be
positive.

Demonstration of Comparative Treynor Measures

Assume we have the following data for three mutual funds; ABC, with their respective
annual rate of return and systematic risk, Beta. The risk free rate is 8 %. The systematic risk
for M (market) is 1.0 and the rate of return for M is 14%.

Investment Manager
Rate of Return
Beta

A
0.12
0.90

B
0.16
1.05
C
0.18
1.2

M
0.14
1.0

Table 6.1

We can calculate the T values for each investment manager:

TM
(0.14-0.08) / 1.00
= 0.06

TA
(0.12-0.08) / 0.90
= 0.044

TB
(0.16-0.08) / 1.05
= 0.076
TC
(0.18-0.08) / 1.20
=0.083

Table 6.2

These results show that A did not even "beat-the-market." C had the best performance, and
both B and C beat the market.

SAMPLE OF 5 EACH OPEN ENEDED EQUITY AND DEBT BASED MUTUAL

FUNDS

Company
Avg. return of 2016

Reliance Fund
34.41 %

DSP BlackRock Micro

35.82 %

Franklin India
34.91 %

SBI
34.45 %

Mirae Asset Emerging Bluechip Fund

33.0 %

ICICI Prudential Fund

12.31 %

UTI transportation & logistics

24.69 %

Reliance Pharma
20.87 %

Franklin India smaller companies

13.22 %

SBI FMCG
9.29 %

TREYNERS PERFORMANCE INDEX

54
Comapny
Rp
Rf
Beta
Treynor

Index

ICICI
62.55 %
8.5 %
0.35
154.428

SBI IT
54.50 %
8.5 %
0.81
56.790
Franklin InfoTech
53.34 %
8.5 %
0.93
48.215

Birla sun life new millennium

50.25 %
8.5 %
0.53
78.773

ICICI prudential export & other

43.59 %
8.5 %
0.62
56.596
services Reg
SBI Pharma
26.05 %
8.5 %
0.92
19.076

UTI transportation & logistics

24.69 %
8.5 %
3.17
5.107

Reliance Pharma
20.87 %
8.5 %
1.64
7.542
Franklin India smaller companies
13.22 %
8.5 %
2.34
2.017

SBI FMCG
9.29 %
8.5 %
0.11
7.181

RANKING ACCORDING TO TREYNER

55
Rank
Particular

1
ICICI prudential technology Reg

2
Birla sun life new millennium

3
SBI IT

4
ICICI prudential export & other services Reg

5
Franklin InfoTech

6
SBI Pharma

7
Reliance Pharma
8
SBI FMCG

9
UTI transportation & logistics

10
Franklin India smaller companies