Crisil Mutual Funds CPR Ratings - what they tell us

Crisil - Credit ratings agency

Crisil is a credit rating agency which rates various companies for their ability to repay back debt. You can read about more about Credit rating agencies here. In addition to this, Crisil also rates mutual funds. Crisil is a well known and reputed company and is a market leader in India (followed by ICRA). Thus the ratings assigned by CRISIL can be taken seriously.

CRISIL CPR ratings

The ratings assigned to Mutual Funds by Crisil are CPR1, CPR2, ... with CPR1 being the topmost rating - for the Best Mutual Fund, according to predetermined criterion used by Crisil. Crisil uses the following criterion to rate a mutual fund.
  1. Past Performance of the Mutual Fund as compared to its peers in the past 2 years - (75% weightage)
  2. Sector concentration of the portfolio of that Mutual Fund
  3. Industry concentration
  4. Liquidity
Note that the rating is not merely on the basis of past performance. Thus a BEST Mutual Fund according to CRISIL CPR ratings may not be the best performing mutual fund. However the other factors considered in the rating are criterion are also important as they are 'risk-minimizing factors'. It is best to split your investments in 2 to 5 mutual funds to further minimize risk (all having CPR 1 ratings). I highly recommend investing in Mutual Funds with CPR 1 ratings, unless you know what you are doing.

To find out the best rated Mutual Funds by CRISIL, click on CRISIL CPR ratings.

Choosing the best from different Fund Families

Crisil groups mutual funds into different categories, Large Cap, Equity Diversified, Small and Midcap, and assigns ratings within each category. if you do not know what category to choose, it is always best to choose "Equity Diversified" (unless you are doing it for a tax saving purpose, in which case you should go for Tax Saving ELSS funds). If you have a larger investment appetite, then I recommend investing in 2 to 3 Equity Diversified Mutual Funds and one Midcap/Small cap Fund.

Jun 15, 2010

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