Downside Capture Ratio
This ratio is a statistical measure of a Fund Manager's overall performance in down-markets. It is used to evaluate how well or poorly the Manager performed relative to a specific index during periods when that index has dropped.
The ratio is calculated by dividing the Scheme's returns by the returns of the index during the down-market and multiplying that factor by 100.
Downside Capture Ratio = Scheme Returns / Index Returns * 100
A Fund Manager who has a capture ratio less than 100 has outperformed the index during the down-market by falling less than the index. For instance, a ratio of 75 indicates that the portfolio declined only 75% as much as the index during the period under consideration.
Usually, schemes which have a more diversified portfolio (not just in terms of number of stocks, but in other aspects too) have better downside-capture ratios owing to their reduced risk profile, compared to schemes having a more concentrated portfolio.
Also, in order to arrive at a meaningful conclusion, it is important that there be a relatively high correlation between the scheme's portfolio and index employed for the purpose of comparison.
As the graphic depicts,
Parag Parikh Flexi Cap Fund currently has a 1 year ratio of 68.85 as against - 19.75 for the BSE S&P 500 Index implying that the Scheme has given positive returns even as the BSE S&P 500 Index fell.
Disclaimer: This may or may not continue in the future.
