Investors looking for high‑growth opportunities often consider small cap mutual funds, which invest in companies with relatively smaller market capitalisations. Although these funds are more volatile, they can deliver strong returns over multi‑year periods — especially if the underlying companies grow rapidly.
Here’s a look at some of the best‑performing small cap funds over the last 3 years based on annualised returns (CAGR).
🏆 Highest 3‑Year Return: Bandhan Small Cap Fund
Among the top performers, the Bandhan Small Cap Fund stands out with the highest 3‑year annualised return of around 31.41 %. This makes it one of the most rewarding small cap schemes for investors focusing on medium‑term growth.
💡 Why it matters: A return above 30 % CAGR over 3 years signals strong stock selection and effective portfolio management in the small cap segment.
📊 Other Top Small Cap Funds (3‑Year Returns)
Here’s a snapshot of other small cap funds with notable 3‑year performance:
- ITI Small Cap Fund — ~27 % CAGR
- Invesco india Smallcap Fund — ~26 % CAGR
- Quant Small Cap Fund — ~23 % CAGR
- Nippon india Small Cap Fund — ~22 % CAGR
These funds have also delivered solid growth, making them attractive options depending on an investor’s risk profile and investment horizon.
📌 What These Returns Mean for Investors
🔹 CAGR Explained: CAGR (Compound Annual Growth Rate) shows the average yearly return over a specified period. A higher CAGR indicates better performance in the chosen timeline.
🔹 Small Cap Risk‑Reward: Small cap funds can generate higher returns than large and mid‑cap funds, but they also tend to be more volatile — meaning prices may swing widely in short periods.
🔹 Time Horizon Matters: Experts generally suggest staying invested for 5–7 years in small cap funds to smooth out market ups and downs and benefit from long‑term growth.
📍 Should You Invest Based on Past Returns?
While past performance — such as 3‑year CAGR — is a useful indicator, it’s not a guarantee of future results. Market conditions change, and returns depend on how well the fund manager selects stocks and adapts to market trends.
Before investing, consider:
- Your risk tolerance and investment horizon
- Fund’s expense ratio and portfolio style
- Diversification across asset classes
- Whether to invest via lumpsum or SIP (Systematic Investment Plan)
Always consult a financial advisor if you’re unsure about investment decisions.
📌 Quick Summary: Top 3‑Year Small Cap Returns
Fund Name
Approx. 3‑Year CAGR
Bandhan Small Cap Fund
~31.41 %
ITI Small Cap Fund
~27 %
Invesco india Smallcap Fund
~26 %
Quant Small Cap Fund
~23 %
Nippon india Small Cap Fund
~22 %
💡 Takeaway: The Bandhan Small Cap Fund currently leads the pack in 3‑year returns among small cap mutual funds, offering investors one of the highest annualised growth rates in its category. However, always balance return expectations with your investment goals and risk capacity before choosing a fund.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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