Average active small-cap fund delivered 20.1% CAGR, with 16 percentage points lower drawdown than the benchmark
On average, active equity mutual funds have generated higher annualised returns while limiting losses better than their benchmark indices. An average active small-cap fund posted the strongest outperformance among the funds have been live since 2013.
Active equity mutual funds have outperformed their respective benchmark indices in both long-term annualised returns and downside protection, according to an analysis by Capitalmind Financial Services Private Limited.
The analysis compares the equal-weighted average performance of direct active funds in the large-cap, mid-cap, small-cap and flexi-cap categories that have been live since 2013 with their respective benchmark indices.
Active funds outperformed benchmarks across all categories
| Category | Average active fund CAGR | Benchmark CAGR | Active fund max drawdown | Benchmark max drawdown |
| Large cap | 13.2% | 12.7% | -35.0% | -37.9% |
| Mid cap | 18.5% | 18.3% | -35.8% | -43.1% |
| Small cap | 20.1% | 16.1% | -44.2% | -59.8% |
| Flexi cap | 15.2% | 13.6% | -35.3% | -38.1% |
Source: Capitalmind Financial Services Private Limited; Note: Average active fund is the equal-weighted average of all direct active funds in the category that went live since 2013; Benchmarks: Large Cap vs Nifty 100 TRI, Mid Cap vs Nifty Midcap 150 TRI, Small Cap vs Nifty Smallcap 250 TRI, Flexi Cap vs Nifty 500 TRI
The return gap between active funds and benchmarks was the widest in the small-cap category. The average active small-cap fund delivered an annualised return of 20.1%, compared with 16.1% for the Nifty Smallcap 250 TRI benchmark.
Flexi-cap funds also recorded a noticeable lead, with the average active fund returning 15.2% annually against 13.6% for the Nifty 500 TRI.
However, in the mid-cap segment, the average active fund generated a CAGR of 18.5%, while large-cap funds delivered 13.2%, barely ahead of their respective benchmarks.
Maximum drawdowns were lower than benchmarks
Maximum drawdown measures the largest decline in a portfolio's value from its peak before recovering. A smaller drawdown indicates lower losses during market corrections.
The largest difference was in the small-cap category, where the average active fund witnessed a maximum drawdown of 44.2%, while the benchmark declined 59.8%.
In the mid-cap category, the average active fund fell 35.8% at its worst compared with 43.1% for the benchmark.
Large-cap active funds recorded a maximum drawdown of 35% versus 37.9% for the benchmark, while flexi-cap funds declined 35.3%, compared with 38.1% for the benchmark.
Small-cap funds recorded the strongest outperformance
Among the four categories, the average active small-cap fund stood out with the highest average CAGR of 20.1%, compared with 16.1% for the benchmark, a lead of 4 percentage points.
It also offered the best downside protection, with maximum drawdown that was about 15.6 percentage points lower than the benchmark.
Disclaimer: This is purely for educational/ informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.
About the Author
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
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