The Mutual Fund Show: What Is Downside Capture Ratio?
Here's how the downside capture ratio works for mutual funds.
Downside capture ratio measures a strategy's performance in down markets relative to the index, according to analysts.
"A value of less than 100 indicates that an investment has lost less than its benchmark, during periods of negative returns for the benchmark," Kaustubh Belapurkar, director of fund research at Morningstar India, told NDTV Profit on The Mutual Fund Show.
"Always look at historical numbers, almost like a rolling down capture ratio over different periods of time, to get a better sense about how really consistent a particular strategy has been in limiting the downside and similarly capturing the upside right," Belapurkar advised.
In terms of challenges, he said, "The problem with large-cap category index is that there are such large index heavyweights that the moment some of those top heavyweights significantly outperform, the large-cap active managers are lagging."
