The small-cap battlefield produced the biggest upset.

In India’s over ₹87-lakh crore mutual fund industry, some of the smallest Davids are giving the biggest Goliaths an uncomfortable lesson in investment performance.

Not through superior distribution networks or decades of experience, but through equity portfolios that have weathered recent market volatility better. The finding revives an awkward question for the industry’s giants: Can success itself become an investment handicap?

Veteran investor Jeremy Grantham once observed: “Size of assets under management is the ultimate barrier to successful investing. As assets grow, you are forced either to pick increasing numbers of decreasingly good stocks or to buy larger, indigestible positions of your original holdings.”

Grantham’s warning has acquired fresh relevance in India’s mutual fund landscape, where the biggest players have accumulated everything newcomers envy — except, in some recent comparisons, the better returns.

A bl.portfolio performance comparison of active equity schemes from newer AMCs that began operations in 2023 or later, against the average performance of the three largest schemes from established AMCs across eight equity fund categories, shows that the newer AMC schemes delivered better average one-year returns, where data was available. The analysis covered 24 active equity schemes across eight newer AMCs.

Return gap

The small-cap battlefield produced the biggest upset. Bajaj Finserv Small Cap returned 7.5 per cent over one year against a negative 2.6 per cent average for the three largest competing schemes and a negative 1.9 per cent for the Nifty Smallcap 250 TRI. Its one-year SIP return stood at 12.3 per cent.

Old Bridge Focused returned 5.4 per cent, while the three largest focused funds averaged a negative 3.5 per cent. The Nifty 500 TRI declined 7.8 per cent. Bajaj Finserv Multi Cap delivered 0.9 per cent, compared with a negative 7.6 per cent average for the largest rivals. Helios Mid Cap lost just 0.6 per cent, against a 3.4 per cent decline among the three largest mid-cap schemes.

Unifi Flexi Cap delivered a 4.6 per cent 1-year SIP return, well ahead of the negative 7.6 per cent category average and negative 8.9 per cent benchmark.

The advantage was less pronounced in categories where portfolios typically have substantial large-cap exposure. Bajaj Finserv Large Cap returned a negative 6.9 per cent, against negative 9.5 per cent for the three largest competitors.

The pattern extended to systematic investments. Across all eight categories, newer schemes delivered better one-year SIP returns than the three largest rivals, reinforcing the breadth of their recent outperformance.

These comparisons are with the largest schemes, not the entire universe of established funds. Several categories also have only one eligible newcomer.

Changing landscape

For decades, India’s mutual fund industry was dominated by established banks, financial institutions and investment houses. Their extensive distribution networks, long operating histories and growing assets helped entrench their market positions.

The established order began facing fresh challengers in July 2023, when Bajaj Finserv Mutual Fund entered the fray, followed by Helios MF, Zerodha MF and Old Bridge MF. Another wave, including Unifi MF, Jio BlackRock MF and Capitalmind MF, arrived in 2025. By September 2026, Bajaj Finserv and Helios had each amassed more than ₹8,500 crore in assets, signalling the growing scale of the newcomers.

Smaller portfolios can move into less-liquid stocks without significantly affecting prices.

For larger funds, even a promising investment can pose a logistical challenge: deploying substantial capital without moving the market is no easy task.

Portfolio disclosures offer glimpses of this flexibility. Unifi Flexi Cap increased its allocation to South Indian Bank from 2.2 per cent to 4.7 per cent, while the stock gained 35 per cent over six months. Bajaj Finserv Small Cap raised its exposure to Welspun Corp, whose stock gained nearly 99 per cent.

Several newer schemes also held stocks in the capital markets, industrials and manufacturing sectors. However, changes in portfolio weights do not necessarily indicate fresh buying or successful market timing; price appreciation alone can increase a stock’s share of a portfolio. Not every David has found its slingshot, though. The Wealth Company Flexi Cap Fund lost 9.7 per cent over one year, underscoring that a relatively young fund is no guarantee of investment success.

There are other caveats. The performance window remains short, and two-year track records are unavailable for several schemes. Differences in sector exposure, cash holdings and investment styles can also explain variations in returns. It is too early to draw firm conclusions, and investors will need to assess whether the outperformance persists across longer market cycles.

Scale, experience and an established franchise can confer formidable advantages and remain important considerations when choosing a fund. But they do not automatically translate into superior returns. For now, the Davids have landed some telling blows. The Goliaths may yet have the last laugh, but their sheer size no longer looks quite so intimidating.

Published on October 24, 2026