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Passive midcap and smallcap funds offer simplicity and low cost, but investors must weigh the risks including tracking error, volatility, and lack of downside protection

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A recent analysis by Ladderup Asset Managers showed that, over the past 10 years, on average, 49 per cent of actively managed midcap funds underperformed the Nifty Midcap 150 Index.

Himali Patel New Delhi

5 min read Last Updated : Jun 05 2025 | 12:23 AM IST

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The new fund offer of Tata Nifty Midcap 150 Index Fund is open. A large number of fund houses already offer midcap and smallcap index funds and exchange-traded funds (ETFs) based on popular indices such as the Nifty Midcap 150 and the Nifty Smallcap 250. Investors must understand the pros and cons of investing in passive funds in the mid- and smallcap segment before taking the plunge.

Outperformance becoming harder

Historically, active mid- and smallcap funds have outperformed their benchmarks over the long term. However, this trend appears to be changing. “The latest S&P Indices Versus Active (SPIVA)

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