Small-cap mutual funds have staged a strong recovery over the past three months, aided by the rebound in the broader market.
According to Value Research data, the small-cap fund category generated an average return of 22.41% over the last three months, outperforming the Nifty Smallcap 250 TRI, which returned 20.73% during the same period.
Within the category, four schemes emerged as clear outperformers, each delivering returns of more than 30%. But while their recent performance has put them at the top of the charts, a comparison across longer time periods reveals notable differences in their track records.
Who topped the latest rally?
JM Small Cap Fund, managed by Asit Bhandarkar, emerged as the best-performing small-cap scheme over the past three months with a return of 36.37%, outperforming both the category average and the benchmark by a wide margin.
It was followed by the Trust MF Small Cap Fund, managed by Mihir Vora, which returned 32.10%. Bank of India Small Cap Fund, managed by Alok Singh, delivered 31.49%, while Motilal Oswal Small Cap Fund, managed by Ajay Khandelwal, completed the list with a 30.33% return.
While all four funds benefited from the recent rally in small-cap stocks, their rankings change when performance is measured over a longer period.
The one-year rankings tell a different story
The order of the top-performing funds over one year differs from the three-month leaderboard.
Although JM Small Cap Fund topped the latest rally, its one-year return stands at 13.43%, placing it sixth among small-cap funds tracked by Value Research.
The highest one-year return belongs to Trust MF Small Cap Fund, which has generated 26.31%. Bank of India Small Cap Fund ranks second with 18.28%, while Motilal Oswal Small Cap Fund has returned 16.58%, placing fourth.
The comparison shows that the funds leading the recent three-month rally are not the same as those leading over a one-year period.
Why the long-term comparison isn’t straightforward
While the four schemes can be compared over one year, the comparison becomes limited over longer periods because of their age.
Three of the four funds are relatively recent launches. Trust MF Small Cap Fund is 1 year and 7 months old, JM Small Cap Fund has completed two years, while Motilal Oswal Small Cap Fund is 2 years and 6 months old.
Since these schemes have not completed three years, comparable three-year and five-year return data is not yet available for them.
The four funds also vary considerably in terms of size. JM Small Cap Fund, despite delivering the highest three-month return, has the smallest assets under management (AUM) at ₹730 crore.
Trust MF Small Cap Fund manages ₹1,891 crore, Bank of India Small Cap Fund has an AUM of ₹2,318 crore, while Motilal Oswal Small Cap Fund is the largest among the four, managing ₹6,515 crore.
Only one fund has been tested over multiple market cycles
Among the four recent outperformers, Bank of India Small Cap Fund is the only scheme with a track record that extends beyond five years.
The fund, which has been in existence for 7 years and 6 months, has delivered a three-year CAGR of 23.88%, ranking 8th among 33 small-cap funds, according to Value Research.
Over five years, it has generated a 20.72% CAGR, placing 5th among 25 schemes in the category.
By contrast, the remaining three funds are yet to complete three years since launch, which means comparable three-year and five-year performance data is not available.
The latest rally has produced a new set of top-performing small-cap funds. While all four schemes have delivered returns of more than 30% over the past three months, three are still in the early stages of their lifecycle. Their performance over the coming years will determine how they compare with more established small-cap funds that have been tested across longer market cycles.