Best thematic factor-based mutual funds 2026: Which equity schemes lead in 1- 3- and 5-year CAGR returns?

Factor-based mutual funds follow specific investment characteristics, or factors, to select stocks rather than relying solely on a broad market outlook or a conventional market-cap-based approach.

These factors can include momentum, quality, low volatility, and alpha. Investors can access these strategies through actively managed funds as well as passive index funds and exchange-traded funds ( ETFs ).

Momentum strategies invest in stocks that have demonstrated relatively strong price performance, betting that the trend may continue. Quality strategies focus on companies with characteristics such as consistent earnings, sound balance sheets, and efficient use of capital.

Low-volatility strategies aim to select stocks that have historically experienced smaller price fluctuations than the broader market. Alpha-based strategies seek to outperform a benchmark through a defined stock-selection approach, while some indices combine multiple factors.

Different factors can perform well or poorly across market cycles, and a strategy that leads over one period may lag over another. Here is how the leading schemes compare across 1-year, 3-year, and 5-year returns.

Active momentum strategies dominate the top five, with Motilal Oswal Active Momentum Fund leading at 20.30%. The Mirae Asset ETF combines momentum and quality factors with small-cap exposure.

This indicates that momentum-oriented strategies have featured prominently among the one-year leaders. However, recent performance alone does not establish whether the trend will continue.

Samco Active Momentum Fund leads the three-year list with a 14.21% CAGR. The remaining leaders include passive strategies tracking alpha, mid-cap momentum, and quality factors.

Low-volatility strategies occupy three of the five positions in the five-year list. ICICI Prudential Nifty 100 Low Volatility 30 ETF leads at 7.33% CAGR, followed by its fund-of-funds counterpart at 7.17%.

No factor scheme appears in all three lists. Samco Active Momentum Fund features among the one-year and three-year leaders, but none of the five-year leaders appears in the other two lists.

For investors, this highlights the importance of comparing performance over multiple periods, understanding the underlying factor, and assessing risk, costs, and portfolio composition.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.

Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance.