Bandhan Small Cap Fund has delivered a compound annual growth rate of 26.1% over the last three years, emerging as a top performer in its category. While the fund has significantly outperformed its benchmark, recent data shows its short-term returns have trailed some peers. Investors should look at both long-term track records and recent performance trends when evaluating small-cap investments.
Bandhan Small Cap Fund has secured the top spot in the small-cap mutual fund category based on its three-year performance. The fund recorded a compound annual growth rate (CAGR) of 26.1%, outpacing both its category peers and its benchmark index. According to data compiled in August 2026, the fund's benchmark index returned 9.1% over the same three-year period, highlighting the fund's ability to generate significant outperformance over the long term.
With an asset base of approximately ₹31,103 crore, Bandhan Small Cap Fund is also one of the larger schemes in its segment. This large asset size allows the fund to maintain a diversified portfolio, but it also brings challenges regarding liquidity, especially when investing in smaller companies that may not be traded frequently. The fund is managed by Manish Gunwani and Kirthi Jain, who have navigated the portfolio through various market cycles.
While the three-year track record is strong, it is important for investors to note that fund leadership in the small-cap category is often dynamic. Recent data highlights that the fund's performance over shorter timeframes, such as one month or three months, has trailed behind some of its competitors. For instance, funds like the Bank of India Small Cap Fund have recently seen higher returns in these shorter windows. This pattern serves as a reminder to investors that short-term market shifts are common and that long-term returns are often a better indicator of a fund's investment strategy.
Small-cap funds carry a 'very high' risk rating, and this remains a crucial factor for any investor. These funds invest in companies that are smaller in size, which makes them more sensitive to economic changes, market volatility, and liquidity constraints. If the market undergoes a sharp correction, small-cap stocks can see steeper declines compared to large-cap stocks. Additionally, the inherent risk in this segment means that investors typically need an investment horizon of seven years or more to ride out the volatility.
Investors monitoring this fund should not rely solely on the three-year return figure. A complete review should include checking the fund's performance in both rising and falling markets, as well as keeping an eye on the consistency of the fund managers' strategy. The difference between long-term success and short-term fluctuations is a standard part of investing in the small-cap space. Staying disciplined with a long-term goal remains the most important step for those holding or considering small-cap mutual funds.