Evaluation of Growth of Mutual Funds and Exchange Traded Funds in India
Keywords:Mutual Funds, Exchange Traded Funds, Tracking Error and Jenson's Alpha.
AbstractInvestors are always baffled about the risk-return characteristics of their investments. There is often the challenge of the alternative between active&passive investments. In case of active mutual funds there are numerous categories of active funds each tracking a different benchmark. It often leads to confusion about how the performance can be compared between one fund to another. The growth of ETFs' has been phenomenal in the recent years due to various advantages of an exchange traded fund compared to the mutual fund as lower cost of management, lesser dependence on fund manager, ease of transaction to name a few. In this context the research analysedthe passive ETF's&prominent Mutual funds both active and passive to justify superior returns at lower risk. The research was based on secondary data, for a period of 5 years i.e. from 2010 to 2015.The various tools used were Sharpe Ratio, Jenson's Alpha, Treynor's Ratio and Tracking error. The study recommends fund houses to implement proactive strategies to reduce tracking error and make ETF's a better alternative for investment.
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