The year 2019 was turbulent for capital markets. It saw many significant developments, including general elections, escalation (and then partial retraction) of a global trade war, rise in big corporate defaults, NBFC crisis, one of the sharpest falls in India's GDP growth in years and significant reduction in the corporate tax rate. The Nifty and the Sensex hit record highs. Midcap and smallcap stocks continued to lag. The weakness in broader markets meant only a few investors with right stocks did well. Portfolio managers were no exceptions. Yet, some proved their mettle by delivering high risk-adjusted returns and keeping investor faith in equities intact during a period of falling risk-free returns.
Despite the odds, some financial institutions handling retail money not only protected the financial health of retail investors but also put their wealth on a higher growth trajectory. The Business Today-Money Today (BT-MT) Financial Awards identified institutions in mutual fund, insurance and pension fund segments that withstood risks and saw remarkable growth in business.
The 7th edition of the awards had 14 categories. ICRA Online was the data partner for identifying nominees in mutual funds and Policybazaar was the knowledge partner for shortlisting candidates in the insurance segment. Money Today did in-house research to identify pension fund nominees.
An eminent jury finalised the winners. V.K. Sharma, Former Chairman, LIC, was the chairman of the jury. The other members included Ashishkumar Chauhan, MD & CEO, BSE, Sunil Rohokale, MD & CEO, ASK Group, Prof. Sandesh Kirkire, IMC PVG Chair in Banking & Finance, JBIMS, and Vishal Dhawan, Founder, Plan Ahead Wealth Advisors. The jury went through the nominations and selected the final winners after extensive deliberations.
How We Did It
Mutual Funds: The methodology for selecting the winners was developed in consultation with our data partner ICRA Online. Returns in equity and debt funds were given an overall weight of 60 per cent; risk was given a weight of 40 per cent. The return score was further divided into three categories, Periodic Return, Relative Return and Return Consistency, with 20 per cent weight for each. Period Return was arrived at after taking into account one-year, three-year and five-year returns. Relative Return was assessed by looking at the funds performance during bull and bear phases and returns during both phases were given equal weights. For Return Consistency, we took daily rolling annual returns over the past three years.
In the Best Value Creator Fund Equity category, we focussed on diversified funds that do not focus on a particular sector or industry. To arrive at the best value creator equity fund, open-ended diversified funds in Large Cap, Mid Cap, Multi Cap, Small Cap, Large and Mid Cap, ELSS and Value-Oriented categories were considered. The risk score was calculated on the basis of downside standard deviation. The risk-free return taken for this was 7 per cent. From the overall risk weight of 40 per cent, we took out 5 per cent and assigned it to churning, as higher churning leads to higher costs and reflects the weaker conviction of the fund manager.
In the Best Value Creator Fund Debt category, we focussed on funds attractive to retail investors. The categories considered were Credit Risk Fund, Medium Duration Fund, Short Duration Fund, Dynamic Bond and Corporate Bond Fund. The risk parameter was divided into two categories of volatility and credit risk with each having an overall weight of 20 per cent. Volatility score was calculated on the basis of standard deviation. Credit risk was assessed on credit quality of securities in the funds portfolio.
To select the best fund managers and fund houses in equity and debt categories, we rated the funds based on final scores. Equity funds with scores above 90 were given the top rating of five while funds with scores above 80 and below 90 got a rating of four. Debt category funds with scores above 95 were given the top rating of five while those with scores above 90 and below 95 got a rating of four.
Fund managers and fund houses with highest number of four and five stars funds were chosen as nominees. Nominees for the Best Fund House Overall were selected on the basis of the highest number of four and five stars in debt and equity categories. Out of the nominations, the final winners were selected by the Jury.
Insurance: A number of parameters were considered to select the winners in life and general insurance categories. These included customer service and satisfaction, size and scale, business growth, financial strength and prudence and regulatory compliance. Policybazaar was our knowledge partner in the insurance category. The products in focus were term plans and unit linked insurance plans.
We selected the Best Term Insurance Provider based on claims ratio, new business, persistency, claim settlement time (average in each quarter), cost per lakh and product features. The three major areas included business growth, product strength and customer satisfaction. In business growth, new business growth was included, which gauged how an insurer performed compared to its peers.
Another parameter was settlement turnaround time, or TAT, which tells us how efficient an insurer is in settling claims. Claim ratios showed how good or bad an insurer is with underwriting. The cost-per-lakh parameter analysed the plans' cost-effectiveness. The features of a term plan such as benefit payout options, riders, coverage, premium paying term, policy term and in-built facilities enhance its strength. The more feature-rich a plan is, the more likely it is to meet the diverse requirements of customers.
To select the ULIP of the Year, two core areas - product performance and product strength - were evaluated. The first-year-linked-premium criteria gave a clear insight into product performance compared to competitors. Return performance was assessed by looking at periodic return and relative return. To gauge periodic return, performance of blue-chip funds was considered for a uniform comparison of how investments in these products performed over a seven-year period. Relative return was calculated in comparison to NIFTY.
Pension Funds: To select the nominees for the Best Pension Fund Provider category, we considered both return and business growth. An equal weightage of 25 per cent was given to one-year return, three-year return, five-year return and latest annual AUM (asset under management) growth.
The cutoff date for insurance data was March 31, 2019, while for mutual fund and pension fund returns, it was December 31, 2019.