Introduction: The Battle of the Heavyweights
In the world of small-cap equity mutual funds, investors often face tough choices. Today, we pit two contenders against each other: the Bandhan Small Cap Fund Direct Growth and the ITI Small Cap Fund Direct Growth. Both funds operate in the same category but have different strategies, performance metrics, and risk profiles. This analysis will help you determine which fund aligns better with your investment goals.
Performance Breakdown: Returns vs Risk
Rolling Returns
When comparing rolling returns, Bandhan Small Cap Fund has outperformed ITI Small Cap Fund across multiple time frames. Over the past year, Bandhan delivered a return of 4.02%, while ITI managed only 1.16%. In the three-year period, Bandhan again led with 29.38% compared to ITI's 23.26%. Over five years, Bandhan's return was 22.58%, significantly higher than ITI's 17.02%.
Capital Protection During Market Crashes
Capital protection is crucial for investors, especially during market downturns. Bandhan Small Cap Fund exhibited a max drawdown of -15.88% over the past year, while ITI Small Cap Fund had a slightly better drawdown of -15.34%. However, when looking at the three-year max drawdown, Bandhan's -22.78% was better than ITI's -24.17%.
Recovery days are also an essential metric; Bandhan has a recovery period of 245 days over three years, while ITI does not have a specified recovery period. This suggests that Bandhan may have a more robust recovery mechanism in place.
Risk-Adjusted Performance
Analyzing risk-adjusted performance, Bandhan Small Cap Fund shines with a Sharpe Ratio of 1.0677, compared to ITI's 0.8962. This indicates that Bandhan is generating more returns per unit of risk taken.
In terms of downside risk protection, Bandhan's Sortino Ratio of 1.5719 outperforms ITI's 1.1251, showcasing its ability to protect against downside volatility better. Furthermore, Bandhan's Alpha of 10.1962 indicates it has outperformed its benchmark significantly, while ITI's Alpha of 6.5790 shows it has also outperformed but to a lesser extent.
Portfolio Overlap & Sector Bets
Both funds have a 12.8% overlap in their holdings, indicating a shared investment philosophy but differing sector allocations.
Top 5 Sectors
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Bandhan Small Cap Fund:
- Financial: 20.18%
- Healthcare: 10.17%
- Construction: 9.60%
- Services: 9.51%
- Consumer Staples: 7.09%
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ITI Small Cap Fund:
- Financial: 18.37%
- Capital Goods: 14.57%
- Healthcare: 14.19%
- Services: 11.06%
- Automobile: 6.86%
Bandhan's heavier allocation to Financials (20.18%) has likely contributed to its superior performance, especially in a recovering economy where financial services often lead the charge. In contrast, ITI's focus on Capital Goods and Healthcare sectors may have provided stability but did not yield the same growth potential as Bandhan's sector bets.
The Final Verdict: Which Should You Buy?
For aggressive investors seeking higher returns and willing to accept higher volatility, Bandhan Small Cap Fund Direct Growth is the clear winner. Its superior rolling returns, better risk-adjusted metrics, and strong sector allocation make it an attractive option for those looking to maximize their investment.
On the other hand, ITI Small Cap Fund Direct Growth may appeal to conservative investors who prefer a slightly lower risk profile and are willing to accept lower returns. Its lower expense ratio of 0.390 compared to Bandhan's 0.510 could be attractive for cost-conscious investors, but it does not compensate for the lower alpha generated.
In summary, if you are an aggressive investor looking for long-term growth, Bandhan is your best bet. If you are more conservative and prefer a lower expense ratio, consider ITI, but be aware of its limitations in returns.