Our Mutual Fund Ranking Framework

A Simple, Consistent and Disciplined way

Our framework evaluates equity mutual funds using multiple dimensions of performance and risk, assigns clear weightages, and applies uniform filters to ensure fair and comparable rankings within each category.

Overview of the Ranking Structure

The ranking methodology is built around three core pillars, each contributing a defined weight to the final score:

1. Fund & Management Quality – 20%

2. Relative Performance – 30%

3. Risk–Reward Efficiency – 50%

This weighting reflects a deliberate emphasis on how returns are generated, rather than returns alone.

1. Fund & Management Quality (20%)

This pillar focuses on structural and qualitative aspects of a mutual fund that influence long-term outcomes.

Key considerations include:

• Expense ratio levels relative to peers

• Lead Fund Manager vintage, ensuring adequate performance history

Lower costs and an established operating history are rewarded, as these factors improve the probability of sustained compounding over long investment horizons.

2. Relative Performance (30%)

Rather than evaluating returns at a single point in time, this component assesses the returns delivered by a fund relative to its peers and the benchmark index, how consistently a fund has delivered returns.

The methodology examines:

• Rolling return performance over longer periods, relative to peers

• Performance relative to the benchmark index

We have considered 3-year and 5-year time periods under this metric. This helps to avoid penalising relatively new but sufficiently seasoned funds while maintaining comparability.

3. Risk-Reward Efficiency (50%)

The largest weight is assigned to this pillar, reinforcing the principle that superior investing is about efficient risk-taking, not just high returns.

This section evaluates how well a fund balances returns against different dimensions of risk, including:

• Risk-adjusted return/performance measures

• Standard deviation

• Capture ratios and consistency during market stress

Funds that deliver competitive returns with lower downside participation, controlled volatility, and superior risk-adjusted outcomes score higher than those that rely on excessive risk to generate performance.

Filters and Eligibility Criteria

To maintain relevance and reliability, the following filters are applied before ranking:

• Minimum fund age requirement of 3-years, ensuring adequate performance history

• Plan-level evaluation - plans are evaluated consistently (regular + growth option), without mixing plan types

• Category-wise ranking, so funds are compared only against true peers

These filters ensure the rankings remain fair, comparable, and actionable.

In Phase I of our ranking framework, we have deliberately focused on active domestic equity funds. This means we have currently excluded categories such as hybrid, debt, global equity, index funds, FoFs, and certain thematic funds where the universe (after applying the above filters) is too small for meaningful comparison. Since these categories need a different evaluation lens, we will be ranking them separately in the later phases.

Scoring and Ranking Process

Each parameter within a pillar is scored on predefined ranges. The weighted scores across all parameters are aggregated to arrive at a final composite score for every fund within its category. Funds are then ranked within their respective equity categories, ensuring no cross-category distortion and apples-to-apples comparison for investors and distributors.

While our ranking framework is derived using a rules-based methodology, the Creso team has reviewed the results and made appropriate tweaks, without overriding the core methodology to ensure consistent and reliable rankings.

How Distributors and Investors can use this framework

• Distributors can use the rankings as a screening and shortlisting tool, alongside suitability and asset allocation considerations

• Investors can use it to identify funds that have demonstrated consistent, risk-aware performance, rather than relying on recent returns alone

Importantly, this methodology is not a recommendation system, but a decision-support framework designed to bring discipline, transparency, and consistency to fund evaluation.

Conclusion

In an environment where market cycles change rapidly and return leadership keeps rotating, a process-driven fund ranking methodology becomes essential. By combining fund quality, performance consistency, and risk-reward efficiency—while applying clear rules and filters—this framework aims to highlight equity mutual funds that are better positioned for long-term wealth creation.

The rankings should always be used in conjunction with investor goals, risk tolerance, and asset allocation requirements.

Disclaimer

• The equity mutual fund rankings are based on a proprietary, rule-based methodology using data sourced from Morningstar and our predefined quantitative parameters. The rankings are intended solely for educational and informational purposes and should not be construed as investment advice, a recommendation, or an opinion on the suitability of any mutual fund scheme.

• Mutual fund investments are subject to market risks, including the possible loss of principal. Past performance and ranking outcomes do not guarantee future results. The methodology does not account for individual investor objectives, risk tolerance, financial situation, or tax considerations.

• Rankings are derived from historical data and may change over time due to market conditions, portfolio changes, or methodology updates. Investors and distributors are advised to exercise independent judgment, conduct their own analysis, and consult appropriate financial or tax advisors before making any investment decisions.

• The use of fund rankings should be only one of several inputs in the investment decision-making process and not the sole basis for selection.