Downside and upside capture ratios

Downside and upside capture ratios measure how much of the benchmark’s down moves and up moves a mutual fund captures, providing insight into the fund’s asymmetric performance characteristics.

Formulas

• Upside capture = Scheme return in up months / Benchmark return in up months × 100.
• Downside capture = Scheme return in down months / Benchmark return in down months × 100.

Interpretation

Upside capture

• >100: Fund outperforms benchmark in up months.
• =100: Fund matches benchmark in up months.
• <100: Fund underperforms benchmark in up months.

Downside capture

• <100: Fund declines less than benchmark in down months (defensive).
• =100: Fund matches benchmark in down months.
• >100: Fund declines more than benchmark in down months.

Ideal scenario

The ideal active mutual fund:

• Upside capture >100: Outperforms in bull phases.
• Downside capture <100: Less drawdown in bear phases.

This asymmetric profile delivers superior risk-adjusted returns.

Typical Indian mutual fund profiles

Use in fund evaluation

Capture ratios reveal:

• Defensive value managers: High downside protection, modest upside.
• Aggressive growth managers: High upside participation, high downside.
• Index-like funds: Both ratios near 100.

For risk-averse investors, low downside capture is particularly important.

See also

• Mutual funds in India
• Alpha mutual fund
• Beta mutual fund
• Sharpe ratio
• Sortino ratio
• Max drawdown
• Std deviation MF
• Balanced Advantage Fund
• Value Mutual Fund

External references

• SEBI
• AMFI India

References

1. CFA Institute curriculum on capture ratios.