Quant Small Cap Fund (formerly known as Quant Income Fund), the largest fund managed by Quant Mutual Fund, offered the highest CAGR based on daily rolling returns in the last three years of around 41.17% among all equity mutual funds excluding sectoral and thematic funds. There were around 228 funds in the mentioned time period, of which this small cap fund outshined.
In the last seven years based on daily rolling returns, Quant Small Cap Fund delivered around 14.53% CAGR and in the last five years based on daily rolling returns, the fund gave 25.20% CAGR and was among the top 11 equity mutual funds in the five-year return chart.
Also Read | Nippon India Small Cap Fund exits IndusInd Bank, Adani Wilmar, 3 other stocks in April
Launched on October 16, 1996, the scheme is given five star rating by ValueResearch and four star rating by Morningstar.
Based on trailing returns, the scheme has managed to outperform its benchmark and category average both in the last three months, three years, and five years whereas it has underperformed against its benchmark and category average in the last six months and one year.
In the last three years, the scheme offered 7.13% return compared to 5.51% return by the benchmark and 4.97% as the small cap category average. In the last three years, it delivered 28.04% return against 24.92% by the benchmark and 22.91% as the category average.
And lastly, in the last five years, the scheme offered 48.28% return compared to 36.29% by the benchmark and 34.58% as the small cap category average.
Note, the trailing returns delivered by the scheme in the last five years were the highest compared to its peers and in the last three months and three years the returns delivered by the fund were the third highest in the category. In the last one year, the scheme delivered the lowest return in the small cap category.
Adhil Shetty, CEO of Bankbazaar.com believes that while the overall small cap category has seen strong tailwinds, a few funds like Quant Small Cap Fund have stood out with even higher alpha generation due to their dynamic asset allocation strategies and active stock selection models and the broader success of small cap funds has largely come from favourable market conditions, a risk-on sentiment among investors, and the ability of fund managers to identify high-growth potential businesses early in their growth cycles.
“Small cap mutual funds as a category have delivered exceptional returns over longer investment horizons. Over the last three to five years, many small cap funds have significantly outperformed large and mid cap peers, with several schemes generating annualised returns upwards of 20–30%,” Shetty added.
He further mentioned that this outperformance has been driven by a strong economic recovery, improving corporate earnings, and increased retail participation in equity markets. “However, these funds have also seen sharp short-term corrections due to the inherent volatility and lower liquidity associated with smaller companies. Over a 10-year period, small cap funds have consistently rewarded investors who stayed invested through cycles, reinforcing the importance of a long-term approach,” he explained.
Also Read | BSE and One 97 among stocks that mutual funds bought and sold in April
Based on yearly returns for the last 10-years, the scheme has offered a negative return in 2019 of around 23.51%. Note, in 2018 mutual fund recategorisation was done by Sebi.
In the calendar year 2020, 2021, 2022, the fund offered the highest return among all small cap funds. The fund offered 75.10%, 88.05%, and 9.50% in 2020, 2021, and 2022 respectively.
An investor with a monthly SIP of Rs 10,000 invested in the fund at the time of its inception would have been 4.08 crore now with an XIRR of 14.43%. The same monthly SIP in the last five years would have been Rs 11.96 lakh with an XIRR of 28.55%. In the last seven years, the value of the same SIP would have been Rs 25.12 lakh now with an XIRR of 31.23%.
A lumpsum investment of Rs 1 lakh made in the fund at the time of its inception would have been Rs 27.32 lakh now with a CAGR of 12.26%. In the last five years, the value of the same lumpsum investment would have been Rs 7.13 lakh with a CAGR of 48.13%. In the last seven years, the value would have been Rs 4.80 lakh with a CAGR of 25.14%.
The small cap fund had 89.66% in equity, 1.83% in debt, and 8.51% in others as on April 30, 2025. In comparison to the small cap category, the scheme is overweight on debt and underweight on equity and holds the same position in others. The category on an average had 91.20% in equity and 8.51% in others.
Being a small cap fund, the scheme invests 22.09% in large caps, 3.24% in mid caps, 11.38% in others and 63.29% in small caps.
Post the allocation by the fund and being the small cap fund, Shetty recommends that it is particularly appropriate for those who are comfortable with short-term volatility and are seeking long-term wealth creation through exposure to the growth potential of small companies however, given the current market scenario, where small-cap valuations are stretched and returns have surged significantly over the past few years, it's important to be cautious.
“An ideal allocation to small-cap funds should generally not exceed 15–20% of the total equity portfolio. Investors with higher exposure may consider trimming their holdings to reduce concentration risk, especially if their investment goals are nearing. Portfolio rebalancing at this point can help manage downside risk in case of a market correction,” he added.
The PE and PBV ratio of the small cap fund were recorded at 38.09 times and 4.09 times respectively whereas the dividend yield ratio was recorded at 0.67 times as of April 2025.
The fund had the highest allocation in the healthcare sector of around 13.55% compared to 10.42% by the category. The scheme is overweight on crude oil, finance, FMCG, logistics, hospitality, realty, and retailing.
Also Read | Edelweiss Flexi Cap Fund shines with strong 10-year track record. Radhika Gupta lauds money management style
The top 10 stocks of the fund constitute 38.92% of the total portfolio as on April 2025. Based on the last three years, the scheme has offered a Treynor ratio of 1.63 and an alpha of 0.27. The sortino ratio of the scheme was recorded at 0.48. The return due to net selectivity was recorded at 0.21 and return due to improper diversification was recorded at 0.07 in the last three years.
The investment style of the fund is to invest in growth oriented stocks in small cap market capitalisation.
Apart from Quant Small Cap Fund, there are 29 funds in the category of which 22 have a three year record. Bandhan Small Cap Fund offered the highest return of around 30.83%, followed by ITI Small Cap Fund which gave 29.51% return.
With many small cap funds available in the market and Quant Small Cap Fund offering good returns, Shetty shares that the outlook for small-cap funds remains cautiously optimistic, while the long-term growth story is intact due to the potential of small companies to scale rapidly, the near-term risks are elevated.
“Market indicators suggest that small-cap stocks are currently trading at high valuations, and historical data shows that such periods often precede corrections. Investors should prefer SIPs (Systematic Investment Plans), which allow gradual exposure to the market and reduce timing-related risks. SIPs help manage volatility better and provide the benefit of rupee cost averaging, especially important when entering segments like small caps,” Shetty added.
One should always choose a scheme based on risk appetite, investment horizon, and goals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in along with your age, risk profile, and Twitter handle.
In the last seven years based on daily rolling returns, Quant Small Cap Fund delivered around 14.53% CAGR and in the last five years based on daily rolling returns, the fund gave 25.20% CAGR and was among the top 11 equity mutual funds in the five-year return chart.
Also Read | Nippon India Small Cap Fund exits IndusInd Bank, Adani Wilmar, 3 other stocks in April
Launched on October 16, 1996, the scheme is given five star rating by ValueResearch and four star rating by Morningstar.
Based on trailing returns, the scheme has managed to outperform its benchmark and category average both in the last three months, three years, and five years whereas it has underperformed against its benchmark and category average in the last six months and one year.
In the last three years, the scheme offered 7.13% return compared to 5.51% return by the benchmark and 4.97% as the small cap category average. In the last three years, it delivered 28.04% return against 24.92% by the benchmark and 22.91% as the category average.
And lastly, in the last five years, the scheme offered 48.28% return compared to 36.29% by the benchmark and 34.58% as the small cap category average.
Note, the trailing returns delivered by the scheme in the last five years were the highest compared to its peers and in the last three months and three years the returns delivered by the fund were the third highest in the category. In the last one year, the scheme delivered the lowest return in the small cap category.
Adhil Shetty, CEO of Bankbazaar.com believes that while the overall small cap category has seen strong tailwinds, a few funds like Quant Small Cap Fund have stood out with even higher alpha generation due to their dynamic asset allocation strategies and active stock selection models and the broader success of small cap funds has largely come from favourable market conditions, a risk-on sentiment among investors, and the ability of fund managers to identify high-growth potential businesses early in their growth cycles.
“Small cap mutual funds as a category have delivered exceptional returns over longer investment horizons. Over the last three to five years, many small cap funds have significantly outperformed large and mid cap peers, with several schemes generating annualised returns upwards of 20–30%,” Shetty added.
He further mentioned that this outperformance has been driven by a strong economic recovery, improving corporate earnings, and increased retail participation in equity markets. “However, these funds have also seen sharp short-term corrections due to the inherent volatility and lower liquidity associated with smaller companies. Over a 10-year period, small cap funds have consistently rewarded investors who stayed invested through cycles, reinforcing the importance of a long-term approach,” he explained.
Also Read | BSE and One 97 among stocks that mutual funds bought and sold in April
Based on yearly returns for the last 10-years, the scheme has offered a negative return in 2019 of around 23.51%. Note, in 2018 mutual fund recategorisation was done by Sebi.
In the calendar year 2020, 2021, 2022, the fund offered the highest return among all small cap funds. The fund offered 75.10%, 88.05%, and 9.50% in 2020, 2021, and 2022 respectively.
An investor with a monthly SIP of Rs 10,000 invested in the fund at the time of its inception would have been 4.08 crore now with an XIRR of 14.43%. The same monthly SIP in the last five years would have been Rs 11.96 lakh with an XIRR of 28.55%. In the last seven years, the value of the same SIP would have been Rs 25.12 lakh now with an XIRR of 31.23%.
A lumpsum investment of Rs 1 lakh made in the fund at the time of its inception would have been Rs 27.32 lakh now with a CAGR of 12.26%. In the last five years, the value of the same lumpsum investment would have been Rs 7.13 lakh with a CAGR of 48.13%. In the last seven years, the value would have been Rs 4.80 lakh with a CAGR of 25.14%.
The small cap fund had 89.66% in equity, 1.83% in debt, and 8.51% in others as on April 30, 2025. In comparison to the small cap category, the scheme is overweight on debt and underweight on equity and holds the same position in others. The category on an average had 91.20% in equity and 8.51% in others.
Being a small cap fund, the scheme invests 22.09% in large caps, 3.24% in mid caps, 11.38% in others and 63.29% in small caps.
Post the allocation by the fund and being the small cap fund, Shetty recommends that it is particularly appropriate for those who are comfortable with short-term volatility and are seeking long-term wealth creation through exposure to the growth potential of small companies however, given the current market scenario, where small-cap valuations are stretched and returns have surged significantly over the past few years, it's important to be cautious.
“An ideal allocation to small-cap funds should generally not exceed 15–20% of the total equity portfolio. Investors with higher exposure may consider trimming their holdings to reduce concentration risk, especially if their investment goals are nearing. Portfolio rebalancing at this point can help manage downside risk in case of a market correction,” he added.
The PE and PBV ratio of the small cap fund were recorded at 38.09 times and 4.09 times respectively whereas the dividend yield ratio was recorded at 0.67 times as of April 2025.
The fund had the highest allocation in the healthcare sector of around 13.55% compared to 10.42% by the category. The scheme is overweight on crude oil, finance, FMCG, logistics, hospitality, realty, and retailing.
Also Read | Edelweiss Flexi Cap Fund shines with strong 10-year track record. Radhika Gupta lauds money management style
The top 10 stocks of the fund constitute 38.92% of the total portfolio as on April 2025. Based on the last three years, the scheme has offered a Treynor ratio of 1.63 and an alpha of 0.27. The sortino ratio of the scheme was recorded at 0.48. The return due to net selectivity was recorded at 0.21 and return due to improper diversification was recorded at 0.07 in the last three years.
The investment style of the fund is to invest in growth oriented stocks in small cap market capitalisation.
Apart from Quant Small Cap Fund, there are 29 funds in the category of which 22 have a three year record. Bandhan Small Cap Fund offered the highest return of around 30.83%, followed by ITI Small Cap Fund which gave 29.51% return.
With many small cap funds available in the market and Quant Small Cap Fund offering good returns, Shetty shares that the outlook for small-cap funds remains cautiously optimistic, while the long-term growth story is intact due to the potential of small companies to scale rapidly, the near-term risks are elevated.
“Market indicators suggest that small-cap stocks are currently trading at high valuations, and historical data shows that such periods often precede corrections. Investors should prefer SIPs (Systematic Investment Plans), which allow gradual exposure to the market and reduce timing-related risks. SIPs help manage volatility better and provide the benefit of rupee cost averaging, especially important when entering segments like small caps,” Shetty added.
One should always choose a scheme based on risk appetite, investment horizon, and goals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in along with your age, risk profile, and Twitter handle.
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