Small-cap mutual funds have emerged as some of the biggest long-term wealth creators for SIP investors. Data from Value Research shows that five small-cap mutual funds generated annualised SIP returns of more than 20% over the past 10 years, highlighting the category’s ability to reward investors who remained invested through multiple market cycles.
The list is led by Quant Small Cap Fund, which delivered an annualised SIP return of 25.92% over the decade. It was followed by Nippon India Small Cap Fund (22.60%), Axis Small Cap Fund (20.97%), Union Small Cap Fund (20.81%) and DSP Small Cap Fund (20.27%).
Five-year rankings tell a different story
The five-year SIP rankings present a markedly different picture, reflecting the sharp rally in small-cap stocks over the past few years and the emergence of a new set of outperformers.
Bandhan Small Cap Fund topped the category with an annualised SIP return of 23.90%, narrowly ahead of ITI Small Cap Fund (23.80%), Invesco India Smallcap Fund (22.87%) and Bank of India Small Cap Fund (22.13%). These four funds also occupy the top positions in the three-year SIP return rankings, suggesting that they have consistently outperformed during the recent market cycle.
Among funds with a longer performance history, Union Small Cap Fund, Quant Small Cap Fund and DSP Small Cap Fund continued to feature among the stronger performers over five years, indicating that they have managed to maintain competitive returns despite changing market leadership.
Only one fund remained among the top performers across all periods
Among all the schemes analysed, Union Small Cap Fund is the only one to feature among the top five across the three-, five- and 10-year SIP return rankings. The fund ranked fourth over three years with an annualised SIP return of 18.40%, fifth over five years at 19.81%, and fourth over 10 years at 20.81%.
However, several funds that lead the three- and five-year rankings, including Bandhan Small Cap Fund, ITI Small Cap Fund, Invesco India Smallcap Fund and Bank of India Small Cap Fund, do not yet have a 10-year performance history. Meanwhile, some of the decade’s top wealth creators have slipped lower in the shorter-term rankings.
Moreover, the gap between the best- and lowest-performing schemes over the decade remained significant, underscoring that while staying invested in the category mattered, fund selection also played an important role in long-term wealth creation.