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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Selection

An investor wants to compare an actively managed large-cap fund with a suitable yardstick to judge whether the fund manager added value. Which is the most appropriate comparison?

The fund should be compared with its declared benchmark on a Total Return Index basis. This captures dividends as well as price changes, giving a like-for-like measure of the manager's value addition. NAV levels or other asset classes are not valid yardsticks.

  1. AThe fund's return against its Total Return Index benchmarkCorrect
  2. BThe fund's return against a bank savings rate
  3. CThe fund's return against a debt fund's return
  4. DThe fund's NAV against another fund's NAV

Explanation

Performance should be compared with the scheme's declared benchmark, and SEBI requires use of the Total Return Index so dividends are included. Comparing NAVs is meaningless as NAVs depend on launch price and history. Savings rates and debt funds are different asset classes.

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