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Many investors worry that large-sized mutual funds lose their edge. The concern is simple because when assets swell into the tens of thousands of crores, funds can become:
- Less nimble, making it harder to enter or exit mid- and small-cap stocks
- Over-diversified, spreading bets too thin
- Conservative, with fund managers avoiding bold ideas to preserve their size
- Victims of their own success, as new money keeps flowing in, putting funds under pressure to pick winning stocks
But do the numbers back this fear? Not quite.
We looked at the largest funds in their respective categories and analysed:
- Their five-year and three-year trailing returns vs the category average
- How consistently they have outperformed their peers using daily rolling 5-year returns
Big can be brilliant, too
- Parag Parikh Flexi Cap Fund: The largest flexi-cap fund in the country with net assets worth over Rs 1 lakh crore, has delivered 26.8 per cent annualised returns over five years, well above the category average of 22.9 per cent. Even more impressively, it has beaten its peers 100 per cent of the time, based on daily five-year rolling returns in the last five years.
- Nippon India Small Cap Fund: In the small-cap space—where concerns about large fund size hurting long-term returns are the loudest—the biggest fund has delivered an impressive 38.6 per cent annual return over five years, well above the category average of 34.8 per cent. It also beat its peers 100 per cent of the time in the rolling analysis.
- HDFC Mid-Cap Opportunities: The mid-cap universe is another space where large AUM worries are raised from time to time. Yet, the largest mid-cap fund clocked 32.9 per cent over five years, ahead of the 30.2 per cent average. Based on daily five-year rolling returns in the last five years, it has beaten the average mid-cap fund 80 per cent of the time.
- ICICI Prudential Large Cap Fund: The largest large-cap fund, with assets under management topping Rs 69,000 crore, delivered 29.2 per cent over five years, slightly higher than the category average of 28 per cent. Based on consistency (on rolling returns basis), a flawless 100 per cent outperformance record.
- The one big outlier? Axis ELSS Tax Saver. Its five-year return of 18.4 per cent is well below the category average of 24.5 per cent. Still, despite this underperformance, it managed to beat its peers 54 per cent of the time, based on daily five-year rolling returns.
So, does size matter?
While large fund size (AUM) can sometimes be a challenge—especially for mid- and small-cap funds—it’s not the size alone that determines performance. What really matters is how the fund is managed and the fund manager’s ability to adapt.
As the data below shows, many of the biggest funds have continued to outperform over time. This suggests that when managed well, scale isn’t a weakness. It’s often a sign of strong investor trust and consistent performance.
Our takeaway
Don’t just look at recent returns or the size (AUM) of the fund. Instead, check:
- Rolling performance consistency over time
- The fund’s ability to beat its peer group and its benchmark
- The manager’s track record of handling scale
So don’t blindly avoid large funds; evaluate them smartly. Because in the world of mutual funds, “big” can still mean “very good”.
Also read: HDFC Flexi Cap: 5 most-bought stocks. Do you own any?
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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