The benchmark change that made funds look worse

What changed. Until 2018, funds were compared against the price return version of an index, which counts only price movement. From 1 February 2018 they are compared against the total return version, which also counts the dividends the index constituents pay.

Why it matters. A fund’s own return already includes the dividends it receives. Comparing that against an index that ignored dividends flattered every fund in the market.

The size of it. Index-level dividend yields in India have mostly run between about 1.5 and 2.5 percent. So the bar moved up by roughly that much, overnight, for everyone.

What it did to the numbers. More funds now appear to trail their benchmark. No fund got worse. The comparison got fair.

What to do with it. When you read that a fund beat its benchmark, check the period. Comparisons that straddle the change are not comparing like with like, and some marketing material still leans on the older, easier yardstick.

What a total return index counts. Price movement plus every dividend the constituent companies pay, treated as reinvested. That is the fair comparison, because a fund receives those dividends too and they sit inside its returns.

Where you still see the old yardstick. Long-run charts that start before 2018 sometimes splice the two together. The rule is that a composite figure should use the price return index only up to the date the total return version became available, and the total return version after. If a chart does not say, treat a narrow margin of outperformance with suspicion.

Why it is worth knowing as a buyer. Beating a total return index consistently is genuinely hard, which is a large part of why low-cost index funds have grown. It is not that active managers got worse. The scoreboard stopped flattering them.

This is general education, not financial advice. Figures are as reported by the source and may change.