Large-cap mutual funds are often the first choice for conservative equity investors. These funds invest predominantly in India’s top 100 companies by market capitalization and are expected to deliver stable returns with relatively lower volatility than mid-cap or small-cap funds.
Many investors assume that if a mutual fund has a massive Asset Under Management (AUM), it should consistently outperform its benchmark. However, that is not always true. Some of the biggest and most popular large-cap mutual funds have struggled to beat their benchmark over the last five years despite managing tens of thousands of crores.
In this article, we analyze 7 large-cap mutual fund giants that disappointed investors by failing to beat their benchmark. This analysis can help existing investors review their portfolios and assist new investors in making informed investment decisions.
Disclaimer: Underperformance over a single period does not necessarily mean a fund is bad. Investors should consider consistency, fund management style, investment objective, risk profile, and portfolio suitability before making investment decisions.
How We Filtered These Mutual Funds
For this analysis, we focused strictly on actively managed large-cap equity mutual funds. The screening criteria used were:
-
Fund Category: Considered only large-cap equity mutual funds.
-
Time Horizon: Compared the funds against their respective benchmarks over the last 5 years.
-
Performance: Selected schemes that generated lower returns than their benchmark.
-
Scale: Included only funds with sizeable AUM where underperformance significantly impacts a large retail investor base.
-
Plan Type: Used Direct Plan annualized returns for clean comparison.
The 7 Large-Cap Mutual Fund Underperformers at a Glance
The table below summarizes the massive scale of capital underperforming the market index.
| Mutual Fund | AUM (₹ Crores) | 5-Year Return | Underperformed Benchmark By |
|---|---|---|---|
| Axis Large Cap Fund | 30,913 | 8.06% | -3.63% |
| UTI Large Cap Fund | 11,976 | 9.24% | -2.45% |
| Mirae Asset Large Cap Fund | 38,379 | 10.19% | -1.50% |
| Canara Robeco Large Cap Fund | 16,692 | 11.13% | -0.56% |
| Aditya Birla Sun Life Large Cap Fund | 29,029 | 11.32% | -0.37% |
| SBI Large Cap Fund | 55,064 | 11.47% | -0.22% |
| Kotak Large Cap Fund | 10,772 | 11.56% | -0.13% |
Deep Dive into Each Mutual Fund
1) Axis Large Cap Fund
-
Fund Objective: The scheme aims to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of large-cap companies.
-
Annualized Returns: 3-Year: 9.41% | 5-Year: 8.06% | 10-Year: 12.76%
-
Why Is It A Disappointment? Axis Large Cap Fund was once among the most recommended large-cap schemes. However, the fund has witnessed a prolonged phase of underperformance in recent years. It lagged its benchmark by 3.63% over the last five years, making it the biggest underperformer among the large-cap giants.
-
Key Risks: Continued underperformance compared to peers; stock selection missing out on market rallies; risk of missing benchmark-beating returns.
2) UTI Large Cap Fund
-
Fund Objective: The scheme seeks long-term capital appreciation through investments primarily in large-cap companies across various sectors.
-
Annualized Returns: 3-Year: 8.77% | 5-Year: 9.24% | 10-Year: 11.91%
-
Why Is It A Disappointment? UTI Large Cap Fund underperformed its benchmark by 2.45% over five years. While the fund offers diversified exposure, its returns have remained stuck below benchmark expectations during this period.
-
Key Risks: Ongoing benchmark underperformance; sector allocation trailing market leaders during swift market rallies.
3) Mirae Asset Large Cap Fund
-
Fund Objective: The scheme aims to generate capital appreciation by investing primarily in equity securities of large-cap companies.
-
Annualized Returns: 3-Year: 10.21% | 5-Year: 10.19% | 10-Year: 13.41%
-
Why Is It A Disappointment? Mirae Asset Large Cap Fund continues to command one of the largest retail investor bases in India. However, despite its strong brand and sizeable AUM, it trailed its benchmark by 1.50% over the last five years.
-
Key Risks: Medium-term tracking underperformance; inherent growth moderation during aggressive market bull runs.
4) Canara Robeco Large Cap Fund
-
Fund Objective: The fund seeks long-term capital growth by investing mainly in large-cap companies with strong business fundamentals.
-
Annualized Returns: 3-Year: 11.34% | 5-Year: 11.13% | 10-Year: 14.52%
-
Why Is It A Disappointment? Although the fund has delivered one of the highest 10-year returns among large-cap funds, its recent five-year performance fell short of the benchmark by 0.56%.
-
Key Risks: Shorter-term return moderation across changing market cycles; standard market volatility risks.
5) Aditya Birla Sun Life Large Cap Fund
-
Fund Objective: The scheme aims to generate long-term wealth by investing predominantly in equity and equity-related instruments of large-cap companies.
-
Annualized Returns: 3-Year: 10.91% | 5-Year: 11.32% | 10-Year: 12.27%
-
Why Is It A Disappointment? The fund narrowly missed outperforming its benchmark, lagging by 0.37% over five years. While the difference is relatively small, investors generally pay active management fees expecting visible alpha generation.
-
Key Risks: Inability of active management to generate market alpha; widening benchmark tracking gap.
6) SBI Large Cap Fund
-
Fund Objective: The objective is to provide long-term capital appreciation by investing mainly in equity and equity-related instruments of large-cap companies.
-
Annualized Returns: 3-Year: 10.39% | 5-Year: 11.47% | 10-Year: 12.65%
-
Why Is It A Disappointment? SBI Large Cap Fund is India’s largest actively managed large-cap fund by AUM. Despite its staggering scale, the fund underperformed its benchmark by 0.22% over the last five years.
-
Key Risks: Massive fund size potentially slowing down quick portfolio rebalancing; underperformance during specific market cycles.
7) Kotak Large Cap Fund
-
Fund Objective: The scheme seeks long-term capital appreciation by investing predominantly in equity and equity-related securities of large-cap companies.
-
Annualized Returns: 3-Year: 11.86% | 5-Year: 11.56% | 10-Year: 13.31%
-
Why Is It A Disappointment? Kotak Large Cap Fund missed beating its benchmark by a tiny margin of 0.13% over the last five years. Although the underperformance is marginal, it still fails to fully justify the higher expense ratio of an active fund over a low-cost index fund.
-
Key Risks: Failure to justify fund management costs; risk of continued marginal underperformance.
Should Investors Exit These Funds?
Not necessarily. One period of underperformance should not be the sole reason to redeem a mutual fund investment. Existing investors should evaluate:
-
Consistency: Look at performance across multiple market cycles using rolling returns instead of point-to-point data.
-
Risk-Adjusted Ratios: Assess metrics like the Sharpe Ratio and Alpha to see how much risk the manager took to get these returns.
-
The Index Alternative: If an active large-cap fund consistently lags behind a Nifty 50 or Sensex Index fund for years, it may be time to shift to a low-cost passive index option to save on expense ratios.
If a fund consistently underperforms both its benchmark and peer funds over long periods, investors may consider reviewing alternatives after evaluating tax implications (LTCG/STCG) and exit loads.
Conclusion
Large-cap mutual funds are designed to provide relatively stable long-term wealth creation rather than extraordinary returns. However, investors pay an expense ratio to active fund managers with the clear expectation that they will outperform the benchmark over time.
Our analysis shows that these 7 large-cap giants failed to beat their respective benchmarks over the last five years, despite collectively managing lakhs of crores of investor money.
This does not automatically make them poor investment choices. Instead, it highlights the absolute importance of periodically reviewing your portfolio rather than investing based solely on fund size, brand name, or historical popularity.
What do you think? Are you currently investing in any of these large-cap mutual funds via monthly SIPs or lumpsum? Share your experience and views in the comments below!
