Five Small-Cap Mutual Funds Record Over 22% Annualised Returns in Three-Year Study

Key Takeaways:

• A small-cap mutual fund performance study reported five schemes with annualised returns above 22% over the selected three-year period. 
• Bank of India Small Cap Fund and Bandhan Small Cap Fund were among the schemes identified in the report. 
• The figures represent historical annualised returns for a particular measurement period and should not be confused with SIP returns or future performance expectations. 

Three-Year Small-Cap Fund Data Shows Return Dispersion 

Five small-cap mutual fund schemes recorded annualised returns exceeding 22% over a three-year measurement period, according to a performance study reported by The Economic Times on 7 October 2026. 

Bank of India Small Cap Fund and Bandhan Small Cap Fund were among the schemes included in the reported dataset. 

The study examined historical returns within the small-cap mutual fund category, where individual scheme performance can differ because of portfolio composition, stock selection and market conditions. 

The reported threshold of 22% refers to annualised historical performance rather than an absolute three-year return. 

What Annualised Returns Measure 

Annualised returns express investment performance as an equivalent compounded yearly rate over a specified period. 

For a lump-sum investment, the compound annual growth rate is calculated using the beginning value, ending value and investment duration. 

A reported three-year CAGR of 22% indicates the annualised rate associated with the historical change in investment value. 

It does not mean that the investment generated exactly 22% in each of the three individual years. 

The actual annual returns may have varied considerably. 

Historical Return Metrics Must Be Distinguished 

The reported three-year figures should not be used interchangeably with SIP XIRR or absolute returns. 

The underlying plan, option and valuation dates must also be consistent when comparing schemes. 

Why Small-Cap Fund Returns Differ 

Small-cap funds invest primarily in companies ranked below the 250 largest listed companies under the applicable market-capitalisation framework. 

Although schemes within this category operate under a common minimum small-cap allocation requirement, their portfolios may differ considerably. 

Differences can arise from sector exposure, individual stock holdings, liquidity management, investment style and portfolio concentration. 

Small-cap companies may also experience larger market-price movements and lower trading liquidity than established large-cap businesses. 

These characteristics can contribute to differences in historical performance across schemes within the same category. 

Performance Data Requires Period-Specific Interpretation 

The reported dataset identifies schemes that crossed a particular annualised return threshold during the selected three-year period. 

It does not establish that those schemes will maintain similar returns in subsequent periods. 

Performance rankings can change when the measurement dates shift, particularly in equity categories experiencing large market movements. 

The study is therefore relevant as a historical comparison of small-cap mutual fund outcomes. 

It illustrates that returns within a common regulatory category can differ materially, even when the schemes share the same broad investment classification.