How have actively managed equity funds performed over 5-year period?

Only 4 out of 10 actively managed equity funds outperformed their benchmarks over the five-year period ending March 2026, shows an analysis done by Cafemutual.

A deeper analysis shows that 44% of actively managed equity funds managed to beat their respective benchmarks during this time. Out of 315 schemes with a five-year track record, just 139 generated alpha.

However, there is a slight improvement. In March 2025, only 34% of funds had outperformed—so performance has edged up over the past year.

Where Is the outperformance coming from?

Interestingly, the outperformance is not broad-based—it’s highly concentrated in a few categories:

• Contra funds and dividend yield funds stood out, with 100% of schemes generating alpha over the five-year period ending March 2026
• Value funds followed closely with a 75% success rate (12 out of 16 schemes beating benchmarks)
• Small-cap funds ranked next with 55% of schemes outperforming (12 out of 22)

What about the popular categories?

Here’s where it gets more surprising.

Some of the most widely held categories struggled to beat their benchmarks:

• Mid-cap funds: Only 24% (6 out of 25) outperformed
• Large-cap funds: Just 33% beat their indices
• Large & mid-cap funds: About 42% outperformed

This raises an important question: Are investors over-allocating to categories that are less likely to generate alpha?

Let us look at the table to know more:

Category average performance

In terms of category-average performance, only five categories of actively managed equity funds consistently generated alpha over the five-year period ending March 2026 — contra funds, dividend yield funds, value funds, small-cap funds and multi-cap funds.

Among all equity fund categories, contra funds delivered a five-year CAGR of 16.65%, outperforming their benchmark (13.38%) by 3.27%.

Dividend yield funds generated an alpha of 3.10% while value funds delivered an alpha of 1.94% over the same period.

Small-cap and multi-cap funds produced marginal alpha of 0.44% and 0.20%, respectively, over the five-year period ending March 2026.

On the other hand, several popular fund categories such as mid-cap funds, focused funds, and large & mid-cap funds underperformed their benchmarks by a significant margin.

Mid-cap funds underperformed their benchmark by around 2.10% over five years.

Focused funds lagged by 0.91%, while large & mid-cap funds underperformed by 0.61% over the same period.

Overall, despite pockets of strong performance, the broader picture is less encouraging.

Based on the category-average performance of all equity schemes, actively managed funds underperformed their benchmarks by 0.29% over the five-year period ending March 2026.

Here’s the table highlighting category average performance

Cafemutual is all set to launch India’s first event on Specialized Investment Funds (SIFs), Cafemutual SIF Summit 2026 on April 23 at the Leela, Mumbai.

With their potential to offer tailored strategies, flexibility and access to niche opportunities, SIFs are rapidly gaining attention as a differentiated investment avenue, positioned between traditional mutual funds and alternative investment funds.

You can register for the event by visiting this link – https://tinyurl.com/3ee63she

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