Investing in small cap mutual funds is considered risky as these schemes are relatively more volatile than their larger peers. Some of these schemes, by virtue of delivering extraordinary returns, become sought after among investors.
Although historical returns are no testimony to their future returns, investors still judge a scheme’s merit on the basis of its past performance.
Here, we examine two popular small cap mutual funds that delivered exceptionally high returns in the past one decade. Before proceeding further, we examine what exactly are small cap funds.
What are small cap mutual funds?
Small cap mutual funds are schemes in which a minimum of 65 percent of portfolio is invested in small cap stocks.
Small cap stocks refer to the securities of companies that are ranked lower than top 250 companies, according to the market capitalisation. While large cap stocks refer to the top 100 companies, the mid-caps refer to the companies falling in the range of 101 to 250, the entities whose market cap is below the top 250 companies are referred to as small cap companies.
The returns delivered by Nippon Small Cap Fund and SBI Small Cap Fund were so high that if someone had invested ‘X’ amount 10 years ago, the investment would have swelled to 10X by now. Sounds incredible, but true!
For example, by investing ₹10,000 in Nippon and SBI Small Cap Funds, one could have accumulated more than ₹1,20,855 and ₹1,01,983 in a span of 10 years, shows the data revealed by mutual fund body (AMFI) as on July 17, 2023.
| Small Cap Fund | 10-year-returns (%) | If invested ₹10,000 | AUM ( ₹crore) |
| Nippon Small Cap | 28.30 | ₹1,20,855 | 33,540 |
| SBI Small Cap | 26.14 | ₹1,01,983 | 19,346 |
(Source: AMFI; data as on July 17, 2023)
As the table shows, if someone invested ₹one lakh in the first scheme i.e., Nippon small cap fund 10 years ago, the investment would have grown to ₹12.08 lakh on July 17, 2023. Likewise, if someone had invested the same amount in SBI Small Cap Fund in July 2013, it would have grown to ₹10.19 lakh in July this year.
The high returns which these funds have showcased led to the popularity of these schemes. No wonder then Nippon Small Cap Fund has an AUM of ₹33,540 crore, highest among all small cap schemes, while SBI small cap fund has managed to garner funds to the tune of ₹19,346 crore.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
