Synopsis- This article highlights best performing high-risk mutual funds that have delivered exceptional returns in 2025. These funds are ideal for aggressive investors seeking higher growth potential and willing to take calculated market risks.
The year 2025 will be a significant year for investors in mutual funds as volatile equity markets, advancing global interest rates, and new inflation cycles have prompted us to prioritize risk management. More investors are thinking in terms of risk-adjusted returns, the amount of return you earn for each unit of risk that you take, rather than just chasing headline returns. It will be imperative for building wealth over a long period of time to be able to identify which funds outperform while managing risk in today’s environment.
7 Best Risk-Adjusted Mutual Funds in 2025
1. Mirae Asset NYSE FANG+ ETF FoF
- Category: International Equity (Global Tech)
- 3-Year Sharpe Ratio: 1.91
- 3-Year Return: 64.7%
- Manager: Siddharth Srivastava
- Rationale for Investment: Great entry point into global tech; exceptional alpha generation even after the 2022 tech selloff; best-in-class risk/reward profile within a highly volatile sector.
2. Parag Parikh Flexi Cap Fund
- Category: Flexi-cap (Indian & Global Equities)
- 5-Y Sharpe: 1.37
- 5-Year Return: 23.38%
- Style: Well-diversified, value-driven, global allocation
- Rationale for Investment: Sustained “all weather” investment success; low risk grading; long-tenured fund manager.
3. HDFC Flexi Cap Fund
- Category: Flexi-cap
- 5-Year Sharpe: 1.37
- 5-Year Return: 30.32%
- Manager: Prashant Jain where conservative allocation and large-capper bias would characterize.
- Rationale for Investment: Low volatility; favorable outperformance when the market corrects and continual alpha generation.
4. SBI Contra Fund
- Category: Equity (Contra)
- 5-Year Sharpe Ratio: 1.13
- 5-Year Return: 30.56%
- Manager: R. Srinivasan, known for value-based contrarian investment stances while taking a more defensive approach.
- Rationale for Investment: Historically proves resilient in the swing of a market and reaps benefits from finding value when the market corrects.
Also read: Top 10 Best-Performing Multi-Cap Mutual Funds in India Offering Up to 32% Returns
5. Nippon India Large Cap Fund
- Category: Large-cap
- 5-Year Sharpe: 1.15
- 5-Year Return: 26.24%
- Manager: Sailesh Raj Bhan, known for index plus exposure while critically moderating risks.
- Rationale for Investment: Good alpha expectations, highly liquid and above average price stability, particularly valuable if $1M+ exclusive in individual large cap portfolios.
6. ICICI Prudential Large Cap Fund
- Type: Large-cap
- 5-Year Sharpe Ratio: 1.07
- 5-Year Return: 22.6%
- Manager: Sankaran Naren selects blue-chip stocks, with risk adjustments made dynamically.
- Why to Buy: Outperforms with a low beta, with the best style for cautious long-term investors.
7. Motilal Oswal Midcap Fund
- Type: Mid-cap
- 5-Year Sharpe Ratio: 1.19 (estimated)
- 5-Year Return: 35.5%
- Manager: Niket Shah, is an active alpha-chaser, and focuses on emerging leaders.
- Why to Buy: This is the best fund (on risk-adjusted and absolute) for an investor who wants more substantial growth, but less concentrated risk.
Key Insights and Takeaways
- Depending on diversification and quality bias, large-cap and flexi-cap funds offer the safest risk-adjusted rewards.
- Hybrid or global equity funds, at least some of which invest in markets outside your local market of residence, offer a way to manage volatility in local markets.
- Above all, consistency and a smoother recovery, means much more than chasing the biggest ‘winners’ in any single year.
- Expense discipline and history of a manager’s skill, is often a major differentiator between funds.
Conclusion
Approaching your mutual fund portfolio with an eye on consistency, not just overwhelming returns placing importance on risk-adjusted leaders can generate wealth with less angst and uncertainty as winds change.
Written By Rachna Rajput