5 Smallcap Mutual Funds with Over 20% CAGR Growth in 5 Years

#2 Bandhan Small-cap Fund

Bandhan Small-cap Fund was launched in February 2020. The fund's investment strategy is to generate long-term capital appreciation by investing in high-quality small-cap companies.

As of 28 February 2026, the fund AUM stands at Rs 204.74 bn, with an expense ratio of 0.49%. The equity allocation stood at 89.75%, followed by debt (0.06%) and cash equivalents (10.19%).

The fund allocates 77.46% to small-cap stocks, 17.36% to mid-cap stocks, and 5.18% to large-cap stocks. The fund holds a diversified portfolio of 245 stocks.

The top 10 stocks account for 19.77% of its portfolio, with REC (3.56%) having the highest weight, followed by Sobha (3.47%), LT Foods (2.46%), The South Indian Bank (2.13%), and Arvind (1.65%).

The fund holds 11.93% of the finance sector, followed by realty (7.55%), pharma and biotechnology (7.48%), banks (7.34%), and consumer durables (4.43%).

The portfolio churn is also low at 0.23, indicating a buy-and-hold strategy. The PE multiple (16.78) is also significantly lower than that of the Nifty Smallcap 250 (24.10).

Using this approach, the scheme has delivered a CAGR of 32.53% over the last five years, outperforming the benchmark's (28.66%). With a standard deviation of 18.34, the scheme is also less volatile than the benchmark (19.44).

The scheme also protects downside better than the benchmark, with a Sortino ratio of 0.71, higher than the benchmark (0.41). Consequently, the scheme outperforms in risk-adjusted returns, with a Sharpe ratio of 0.37, higher than the benchmark's (0.22).

#3 Invesco India Small-cap Fund

Invesco India Smallcap Fund was launched in October 2018.

The fund employs a bottom-up investment approach. It maintains a bias toward growth stocks and typically follows a fully invested approach, holding a concentrated portfolio of around 40 to 65 stocks.

The overall equity investment process combines bottom-up stock categorisation with top-down analysis, and includes an ESG (Environmental, Social, Governance) overlay. The fund follows a structured framework that categorises stocks into three buckets: Growth, Value, and Event.

Under Growth, it invests in leaders with strong margins, differentiated propositions, and young companies benefiting from operating leverage.

The value bucket includes companies, where asset value can be unlocked and turnaround stories returning to growth.

The Event category covers corporate actions or restructuring, and commodity firms, which ride favourable business cycles.

When selecting individual stocks, it looks for companies offering higher growth prospects at reasonable valuations, ensuring expansion does not come at an excessive price.

The fund prefers companies with distinct competitive advantages, financial strength, healthy return on capital, consistent free cash flow generation, and credible management execution.

As of 28 February 2026, the fund's AUM was Rs 97.17 bn, with a direct plan expense ratio of 0.4%. The scheme's current asset allocation is 98.9% in equity, followed by cash equivalents (1.1%).

Small-caps accounted for 68.15% of the portfolio, mid-caps (20.42%), and large-caps (11.43%). The fund holds a diversified portfolio of 64 stocks, with the top 10 stocks accounting for just 38.67%.

In portfolio allocation, healthcare accounted for 12.99% of the portfolio, followed by banks (10.55%), pharma and biotechnology (8.78%), consumer durables (8.64%), and retailing (7.46%).

Amber Enterprises (4.25%) has the highest weight, followed by Sai Life Sciences (5.08%), KIIMS (4.87%), Max Health (3.87%), and Swiggy (3.74%).

The fund also moderately churns its portfolio, as evident from a turnover ratio of 0.52. The PE multiple (39.47) is also at a significant premium to Nifty Smallcap 250 (24.10).

Using this approach, the scheme has delivered a CAGR of 31.38% over the last five years, outperforming the benchmark's (28.66%).

With a standard deviation of 17.79, the scheme is less volatile than the benchmark (19.44). The fund also protects downside better, with a Sortino ratio of 0.55, higher than the benchmark (0.41). Consequently, it outperforms in risk-adjusted returns, with a Sharpe ratio of 0.30, higher than the benchmark's (0.22).

#4 HSBC Small-cap Fund

HSBC Smallcap Fund was launched in May 2014.

The fund follows a research-led investment approach focused on identifying under-researched and under-owned small-cap companies. However, it could reallocate a portion of its assets to fixed-income securities if the fund manager turns negative on the Indian equity markets.

Its philosophy is anchored in fundamental research, with an emphasis on businesses that demonstrate earnings acceleration, strong execution, sound management, and healthy financials. The fund seeks an optimal blend of profitability and valuation, to accumulate quality small-cap stocks at reasonable prices.

Its proprietary three-stage process, stock selection, detailed analysis, and portfolio construction combine quantitative and qualitative filters to evaluate opportunities.

Through this framework, the fund positions itself to capture long-term earnings expansion and invest in potential large-cap leaders of tomorrow, while adhering to a defined risk matrix.

As of 28 February 2026, the fund's AUM was Rs 153.75 bn, with a direct plan expense ratio of 0.7%. The scheme's current asset allocation is 96.58% in equity, followed by cash equivalents (3.42%).

Smallcaps account for 72.06% of the portfolio, followed by midcaps (25.51%) and largecaps (2.42%). The fund holds a diversified portfolio of 110 stocks, with the top 10 stocks accounting for just 19.47%.

In the sectoral mix, industrials accounted for 24.43% of the portfolio, followed by financials (21.31%), consumer discretionary (14.24%), materials (12.82%), and healthcare (10%).

Karur Vysya Bank has the highest weight of 3.09%, followed by The Federal Bank (2.09%), Apar (1.97%), MTAR Technologies (1.94%), and PNB Housing (1.83%).

The scheme's PE of 30.11 is at a premium to the Nifty smallcap 250 (24.10). The portfolio turnover ratio is lower at 0.38, indicating a moderate churn strategy.

Using this approach, the scheme has delivered a CAGR of 30.85% over the last five years, outperforming the benchmark (28.66%). With a standard deviation of 18.97, the scheme is also slightly less volatile than the benchmark (19.44).

However, the fund has struggled to cushion downside risk, reflected in a lower Sortino ratio of 0.32 compared to the benchmark's 0.41. Consequently, the scheme underperforms in risk-adjusted returns, with a Sharpe of 0.19, lower than the benchmark's (0.22).

#5 HDFC Small-cap Fund

HDFC Smallcap Fund was launched in January 2013.

The objective of this fund is to construct a portfolio of small-cap companies that possess reasonable growth prospects, a strong financial position, a sustainable business model, and an acceptable valuation.

As of 28 February 2026, the fund's AUM was Rs 374.724 bn, with an expense ratio of 0.73%. The scheme's current asset allocation is 91.97% in equity, followed by cash equivalents (8.03%).

Smallcaps accounted for 81.5% of the portfolio, followed by midcaps (11.32%) and largecaps (7.18%). The fund holds a diversified portfolio of 84 stocks, with the top 10 stocks accounting for just 27.93%.

In the sectoral mix, industrials accounted for 23.72% of the portfolio, followed by consumer discretionary (18.26%), financials (13.83%), healthcare (11.71%), and materials (8.38%).

Aster DM has the highest weight of 4.21%, followed by Bank of Baroda (4.03%), Firstsource (3.20%), eClerx (2.58%), and Indian Bank (2.56%).

The scheme's PE of 21.88 is also at a discount to the Nifty smallcap 250 (24.1). The portfolio turnover ratio is extremely low at 0.78, indicating a buy-and-hold strategy.

Using this approach, the scheme has delivered a CAGR of 30.63% over the last five years, outperforming the benchmark (28.66%). With a standard deviation of 16.24, the scheme is less volatile than the benchmark (19.44).

The fund has cushioned downside risk, as reflected in a lower Sortino ratio (0.44) compared with the benchmark's 0.41. Consequently, the scheme edges slightly ahead on risk-adjusted returns, with a Sharpe ratio of 0.23, slightly higher than the benchmark's 0.22.

Bottom line

The last five years highlight how small-cap funds can create meaningful wealth when backed by strong stock selection and disciplined portfolio construction.

Funds that delivered over 20% CAGR did not just ride momentum; they managed risk, controlled drawdowns, and stayed invested through cycles.

However, such returns come with phases of volatility. For investors, the takeaway is not past performance but the ability to stay invested over the long term and maintain realistic return expectations.

#Table Note: Data as of 24 March 2026
Rolling period returns are calculated using the Direct Plan-Growth option.
Returns over 1 year are compounded annually.
Standard Deviation indicates risk, while the Sharpe ratio and Sortino ratios measure risk-adjusted return.
They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
The category average of all small-cap mutual funds is considered.
Please note that the returns here are historical.
The funds listed at the top of the table are ranked by 5-year returns. The list of schemes is not exhaustive.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendations.
Speak to your investment advisor for further assistance before investing.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.

Disclaimer: This write-up is for information purposes and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are unsure about your risk appetite, consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks. Read all scheme-related documents carefully. Registration granted by SEBI, Membership of BASL, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.