Overview

Not all underperformance is cyclical, and the SPIVA India Scorecard shows 93 percent of large-cap funds underperformed their benchmark over 5 years, a pattern too consistent to blame on a bad year. Strategic exits are about spotting funds that are structurally broken, whether through manager exits, style drift, or shrinking AUM, not about timing markets or abandoning long-term investing. Meanwhile 50 percent of all mutual fund units in India get redeemed within a year, so your real job is keeping clients disciplined while still catching the funds that genuinely deserve an exit.

Key Points

• Watch for 3+ years of persistent underperformance versus benchmark
• Track Alpha, Beta, and Sharpe Ratio for deteriorating risk metrics
• Three consecutive quarters of AUM outflows is a warning sign
• Use the 3-3-3 Rule: thesis, data ratios, and alternatives with overlap
• Frame exits as strategic reallocation, not an admission of failure

Takeaways

Only 3 percent of mutual fund units in India are held over five years, so distinguishing genuine structural red flags from ordinary market-wide volatility protects both client wealth and your own credibility. A calm, data-driven exit conversation grounded in specific numbers builds far more trust than avoiding the topic or blaming the market.

Action Step

Pick one client portfolio with at least 5 funds and run the 3-3-3 Rule analysis on each this week.