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Stock Analysis, IPO, Mutual Funds, Bonds & More

These small-sized mutual funds outshined their larger peers in last 5 years

Out of the 40% schemes that managed to deliver double digit in the last five years, 23% were small-sized funds holding an AUM of up to Rs 500 crore.

, ET Online|
Oct 22, 2019, 12.56 PM IST
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While most equity mutual funds were struggling to beat inflation or give decent double-digit returns in the last five years, some small-sized equity schemes managed to offer double-digit returns during the same period. The data is significant because most mutual fund investors prefer large-sized schemes to the smaller ones. Many investors believe that large size is a testimony to the impressive track record of the scheme that attracted a large number of investors.

As high as 60% equity mutual funds gave single-digit returns in the last five years. Around 8% of them manage assets of more than Rs 10,000 crore, and 23% have an AUM of over Rs 5,000 crore.

Out of the 40% schemes that managed to deliver double digit in the last five years, 23% were small-sized funds holding an AUM of up to Rs 500 crore.

ETMutualFunds.com looked at large cap, mid cap, large & mid cap, small cap, multi cap and ELSS of tax-saving funds for the study.

Category-wise, three out of seven large cap schemes falling in the top quartile were small-sized schemes. The three schemes are JM Core 11 Fund (Rs 53 crore AUM), Canara Robeco Bluechip Equity Fund with assets worth Rs 238 crore and Indiabulls Bluechip Fund managing an AUM of Rs 209 crore. These schemes gave double-digit returns of 12.4%, 10.4%, and 10% respectively. The double-digit returns become all the more important here as only eight out of 28 large cap schemes managed to achieve the feat.

You must note that this study considers and compares schemes which have completed five years. Some good schemes may not feature in the list if they have not completed five years.

Quant Large and Mid Cap Fund, with an AUM of Rs 4.23 crore, the smallest fund in the large & mid cap category, delivered double-digit returns of 13.6% in the last five years. The returns are third highest in the category.

In the multi cap category, JM Multicap Fund managing assets worth Rs 139 crore gave 12.5% returns in the five-year period managed to be in the top quartile. Another fund, Quant Active delivered double-digit returns of 10.5% in the same time period.

Merely eight out of 25 multi cap schemes could oofer double-digit returns in the last five years.

ELSS category also had two small-sized schemes in its top quartile. Quant Tax Plan, a tiny fund with assets worth Rs 10 crore, delivered 13.7% returns in the last five years. The returns were second highest in the category. Second scheme that made it to the top quartile is JM Tax Gain with 12.3% returns. This scheme has an AUM of Rs 33 crore.

Does it mean you should invest in these smaller funds?

If it is only on the basis of the returns, then certainly not. The fundamental advice remains the same: you should choose your mutual fund schemes based on your risk profile and time in hand to reach your goal, and your risk profile. However, this data clearly shows that you should not underestimate the smaller funds because of their size.

But you should also refrain from investing in tiny funds as they might have a few unique investors. And if one or two of them take out their money, the tiny scheme might be in a fix.

Always go for the consistently performing schemes. Category toppers, whether large funds or smaller funds, need not remain the same in all weathers. However, sticking to consistent schemes will help you to reach your goal in time.

For help on best schemes to invest, read:
Best mutual funds to invest in 2019
Best mutual fund SIP portfolios to invest in 2019

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