6 days ago
Three Smallcap Mutual Funds Showing Long-Term Growth Potential
Small-company shares in India had a nearly flat year after several strong years.
The article compares three mutual funds that invest in these companies.
Bandhan had the strongest three-year results but is relatively large and has a shorter history.
Invesco beat its benchmark over one, three, five, and seven years.
Union performed best recently, although its three-year results were weaker.
A benchmark is a standard measure used to judge whether a fund is doing well.
Many smallcap funds failed to beat that benchmark over three years.
Smallcap funds can fall sharply, so investors should not use money they may need soon.
The article says investors should consider at least seven years, and preferably ten, before investing.
The Nifty Smallcap 250 TRI returned just 0.64% in the year through 23 August 2026.
Bandhan Small Cap Fund led on three-year rolling returns, while Invesco consistently beat the benchmark across four periods.
Union Small Cap Fund delivered the strongest recent performance but has lagged over three-year periods.
Only seven of 24 funds with three-year records beat the Nifty Smallcap 250 TRI.
The article recommends a minimum seven-year horizon, careful risk assessment, and evaluation of costs and portfolios.
- Who
- Bandhan Small Cap Fund, Invesco India Smallcap Fund, and Union Small Cap Fund are the three schemes evaluated.
- What
- The article identifies three smallcap mutual funds with potential for long-term growth based on returns and risk measures.
- Where
- The analysis concerns India's smallcap mutual-fund market.
- When
- The performance data covers periods through 23 August 2026.
- Why
- Investors are reviewing smallcap funds after the benchmark moved sideways for a year, while the article says valuations appear attractive.
Reasons to Consider
Risks and Cautions
Return potential
Reasons to Consider
Bandhan delivered the strongest three-year rolling return, Invesco outperformed consistently, and Union showed strong recent performance.
Risks and Cautions
Past performance does not guarantee future results, and two-thirds of the funds with three-year records lagged the benchmark.
Fund size
Reasons to Consider
Union's smaller asset base may allow it to take more meaningful positions in genuinely small companies.
Risks and Cautions
Bandhan's approximately Rs 311 billion asset base may make it harder to invest significantly in the smallest companies.
Track record
Reasons to Consider
Invesco's benchmark outperformance across four time periods provides evidence of consistency, while Bandhan has strong shorter-term data.
Risks and Cautions
Bandhan lacks a seven-year record, and Union's strong recent results are the first substantial evidence on its current management team.
Key facts
- Benchmark one-year return
- The Nifty Smallcap 250 TRI returned 0.64% in the 12 months through 23 August 2026.
- Bandhan three-year return
- Bandhan Small Cap Fund returned 30.48%, compared with 20.74% for the benchmark in the snapshot.
- Invesco consistency
- Invesco India Smallcap Fund beat the benchmark over one, three, five, and seven years.
- Union recent return
- Union Small Cap Fund had a one-year rolling return of 9.94%, the second-highest in the category.
- Category performance
- Only seven of 24 smallcap schemes with three-year records beat the benchmark.
- Fund size
- Bandhan had approximately Rs 311 billion in assets, while Union had approximately Rs 22.7 billion.
- Suggested horizon
- The article describes seven years as the minimum sensible horizon for smallcap investing and ten years as preferable.
Sources
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