Which Are the Top Performing Small Cap Funds to Invest in for 10 Years?

Current small-cap stocks’ valuations seem daunting as compared to broader markets. The fear among the investors is that such stocks are not easily converted to cash and can make investors unwell with ease. But many fund managers and investment advisors say that there is no reason to worry about if investors are investing for the long term. So, if you are also looking for investment in the small cap funds with an investment horizon of 10 years or more, then some of the top performing funds that can give you high returns are provided in the table under:


Top Performing Small Cap Funds:

The funds have been short listed after analysing them on various parameters such as past returns, investment strategies, fund management, portfolio designing and diversification. You can invest in any of these funds if you have an appetite of tolerating high-risk as well as have a long investment horizon. If you are a long-term investor and want to generate wealth by investing in mutual funds, get the brief details of top small cap mutual funds below:

Trailing Returns (As on Oct 26, 2018)

1. L&T Emerging Businesses Fund

A scheme in the small-cap fund’s category, it has provided the returns of 21.03% since May 2014 (its inception). The fund has delivered benchmark-beating returns in the past three years. It has also outperformed many funds of this category.

It is currently being managed by Mr S N Lahiri, who has managed to generate the highest returns in its category by 9.39% in the past three years (as on Sept 30, 2018). The fund has not faced any serious market downturn; therefore, it has yet to see how it performs in a negative market and manages losses.

2. HDFC Small Cap Fund

The fund invests at least 50% of its total corpus in the equities of small-cap

companies during all the market cycles. Besides this, it has given a good percentage of allocation to mid-caps as well. It has delivered the returns of 14.07% since its launch, i.e., April 2008.

HDFC Small Cap has managed the recent correction in the small-cap category in a better way as compared to its peers. The fund has also outperformed benchmark index and other funds of the category in the past three year period.

3. SBI Small Cap Fund

The scheme follows the combination of growth and value investing approach by picking the stocks following the approach of bottom-up within small-cap space. This helped the fund to offer the returns of 18% since Sept 2009.

SBI Small Cap is being managed by Mr R Srinivasan who buys the stocks which offer a competitive advantage, return on capital, growth, management and valuation.

4. Reliance Small Cap Fund

A top-rated fund launched in the year 2010 that has generated the returns of 17.61% since then. The fund adopts the philosophy of investing in good businesses at a reasonable price. It does not lean overtly towards either the value or growth styles of investing; therefore managing under different market conditions.

The fund has shut taking any fresh lumpsum investments, but investors can invest through SIP. The fund keeps changing the portfolio which can be seen in its high portfolio-turnover ratio.

5. Franklin India Smaller Companies Fund

In the past three months, NIFTY Smallcap 250 TRI is down by 10.74%, while the fund has capped its losses and managed up at -8.01%. This shows that the fund is managed so well and demonstrates outperformance or alpha. Franklin India Smaller Companies is being managed by Mr R Janakiraman, and under his leadership, the fund has managed to outperform 91% of its peers.

He focuses on investing in the companies which provide high returns on investments, free cash flows and consistent growth. The fund depends predominantly on the bottom-up approach to pick quality stocks for its portfolio. This has helped it in delivering the annualized returns of 13.26% since launch, i.e., Jan 2006.

Investors mostly choose small-cap funds when they are looking for high returns. But for such returns, investors should also know that the longer time horizon can serve them better. So you can invest in any of these funds with a long-term perspective.

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