Top 4 Mid-Cap Mutual Funds Beating Its Benchmark Returns

In the dynamic landscape of investment, mid-cap funds have emerged as an attractive avenue for investors seeking growth opportunities. Among the plethora of options available, four funds have stood out, managing a collective asset base of Rs 2.90 lakh crore. What sets these funds apart is not just their substantial size but also their remarkable performance, outpacing the Nifty Midcap 150 TRI’s returns of 25.92% over the last five years.

These funds delivered on the performance front too and beat the benchmark returns of 25.92% over the last 5 years:

Data as of – 27-02-2024

Quant Mid Cap Fund

The Quant Mid Cap Fund is predominantly invested in equity, comprising 97.29% of its portfolio. Within equity holdings, it maintains a diversified spread with 84.09% allocated to individual stocks, 13.20% to Futures & Options (F&O), and no exposure to foreign equity. The fund holds a total of 38 stocks, notably lower than the category average of 69.52, indicating a more concentrated portfolio strategy.

In terms of market capitalization, the fund exhibits a tilt towards mid-cap investments, which constitute 40.14% of its holdings, while large-cap and small-cap investments account for 24.16% and 13.95%, respectively. Additionally, there’s a 19.04% allocation categorized as ‘Other’.

In debt securities, the fund holds a minor allocation of 3.77%, spread across three holdings, which contrasts with the category average of 0.59%.

Assessing risk, the fund demonstrates high volatility compared to its category peers, with a standard deviation of 17.76 versus the category average of 14.86. Similarly, its beta indicates higher volatility at 0.98 compared to the category average of 0.88.

Despite this heightened risk profile, the fund delivers superior risk-adjusted returns across various metrics. Its Sharpe Ratio stands at 1.53 versus the category average of 1.23, indicating better risk-adjusted returns. The Treynor’s Ratio also highlights the fund’s outperformance, with a ratio of 0.28 compared to the category average of 0.21. Additionally, Jension’s Alpha further reinforces its superior performance, standing at 4.98 versus the category average of -1.34.

Motilal Oswal Midcap Fund

The Motilal Oswal Midcap Fund primarily invests in equities, constituting 92.58% of its portfolio. Within equities, it holds 92.94% in stocks, with minimal exposure to Futures and Options (F&O) at 0.36% and no foreign equity holdings. The fund is diversified across 26 stocks, below the category average of 69.52. Notably, it allocates 16.18% to mid-cap investments and a significant 41.75% to small-cap investments, with the remainder in other categories.

In terms of risk metrics, the fund exhibits high volatility, indicated by a standard deviation of 15.84, compared to the category average of 14.86. However, it offers relatively better risk-adjusted returns, as evidenced by a Sharpe ratio of 1.6, surpassing the category average of 1.23. Similarly, its Treynor’s ratio of 0.3 outperforms the category average of 0.21, suggesting superior risk-adjusted returns concerning market risk. Additionally, the fund demonstrates favourable Jension’s Alpha, indicating an ability to generate excess returns of 6.19 compared to the category average of -1.34.

PGIM India Midcap Opportunities Fund

The PGIM India Midcap Opportunities Fund primarily invests in equity (97.25%), with a diversified portfolio comprising 72 stocks, slightly above the category average of 69.52. The fund’s equity holdings are spread across different market segments, with 8.5% in large-cap, 27.24% in mid-cap, and 35.12% in small-cap investments, indicating a tilt towards smaller companies. Additionally, the fund holds 0.2% in debt instruments and 2.55% in other assets.

In terms of risk metrics, the fund exhibits relatively low volatility compared to its category average, with a standard deviation of 14.82. It also demonstrates low beta, indicating less sensitivity to market fluctuations, at 0.87 compared to the category average of 0.88. However, the fund’s risk-adjusted returns, as measured by the Sharpe Ratio, Treynor’s Ratio, and Jensen’s Alpha, fall below the category average, suggesting poorer performance in delivering returns relative to the level of risk taken. The Sharpe Ratio stands at 1.07 versus the category average of 1.23, Treynor’s Ratio at 0.18 versus 0.21 for the category, and Jensen’s Alpha at -3.82 compared to -1.34 for the category.

Nippon India Growth Fund

The Nippon India Growth Fund primarily allocates its assets to equity investments, constituting a substantial 98.79% of its portfolio. Within this allocation, the fund diversifies across a range of stocks, holding positions in 98 individual companies. Notably, it maintains a focus on mid-cap investments, with 50.57% of its equity holdings in this segment, alongside allocations to large and small-cap investments at 12.98% and 14.44%, respectively. This allocation strategy suggests a balanced approach to capturing growth opportunities across different market capitalizations.

In terms of risk metrics, the fund exhibits high volatility, with a standard deviation of 15.25 compared to the category average of 14.86. Despite this, it demonstrates a slightly higher beta of 0.92 against the category average of 0.88, indicating a potential for amplified market movements. However, this higher risk is accompanied by superior risk-adjusted returns, as evidenced by its Sharpe Ratio of 1.47 compared to the category average of 1.23. Moreover, both Treynor’s Ratio and Jension’s Alpha further support the fund’s ability to generate better risk-adjusted returns, with ratios of 0.24 and 1.6, respectively, outperforming their respective category averages.

Which one is the best?

Ranking table for the four funds based on their performance and characteristics:

Among the four funds analyzed, the Nippon India Growth Fund stands out as the most promising option for investment. With a predominantly equity-focused portfolio diversified across various market segments, including mid-cap, large-cap, and small-cap investments, it adopts a balanced approach to capturing growth opportunities.

Despite exhibiting high volatility, the fund consistently delivers superior risk-adjusted returns, as indicated by its higher Sharpe Ratio, Treynor’s Ratio, and Jensen’s Alpha compared to the respective category averages. This suggests a compelling investment opportunity for those seeking potentially higher returns while managing risk effectively.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.