Bandhan Small Cap Fund has delivered a 25.5% three-year CAGR, outperforming key peers and its benchmark. However, investors should note that the fund has trailed the category average in recent short-term periods. With an AUM of ₹31,103 crore, the scheme carries the high risk and potential liquidity challenges typical of the small-cap segment.
Bandhan Small Cap Fund has secured a leading position in the small-cap mutual fund category, delivering a three-year compound annual growth rate (CAGR) of 25.5% as of August 2026. This long-term performance places it ahead of several prominent rivals, including ITI Small Cap Fund and Invesco India Smallcap Fund, which reported returns of 24.6% and 23.2% respectively over the same period.
The fund’s performance against its benchmark is also notable. Over the last three years, the scheme outpaced its benchmark index by 16.3 percentage points, with the index returning 9.2%. As of mid-August, the fund managed a large corpus of approximately ₹31,103 crore, making it one of the more significant schemes in terms of asset size within its category.
While the three-year figures paint a strong picture, the fund's recent performance trajectory shows a different trend. Data indicates that the fund has underperformed the small-cap category average across shorter time horizons, specifically over the past 12, 6, and 3-month periods. This serves as an important reminder for investors that a strong long-term track record does not always guarantee consistency in the short term, especially in volatile market segments.
Small-cap funds are mandated to invest at least 65% of their assets in smaller companies, which inherently carries a 'very high' risk rating. This structure exposes investors to higher price volatility compared to large or mid-cap funds. Additionally, large small-cap funds can face liquidity risks during market stress, as it may become difficult to exit positions in smaller, less liquid stocks without impacting their market price.
Investors evaluating the fund should look beyond the 25.5% three-year return. The key monitorable for the coming quarters will be whether the fund management can address the recent short-term lag relative to the category average. Ongoing tracking of the fund's portfolio turnover and how it manages liquidity in different market cycles remains essential for those holding or considering an investment in this category.