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Information ratio: 183 of 254 equity funds earned their risk

183 of 254 active equity funds with three years of history have a positive information ratio. Multi Cap has the best median (0.88), Small Cap the weakest.

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What it asks

Most fund comparisons rank by return. The information ratio asks a different question: how much did a fund beat its benchmark by, for each unit of the difference in its returns? It is the fund's excess return divided by its tracking error. A fund that beats its index by 3% every year with little variation scores higher than one that beats it by 3% on average through large swings.

We took the 254 Direct Growth equity funds in nine categories that have three years of history and an information ratio on WealthTicker, each measured against its assigned total return benchmark (usually the Nifty 500 TRI, with the Nifty 100 TRI for Large Cap, the Midcap 150 TRI for Mid Cap and the Smallcap 250 TRI for Small Cap). The figures are as computed on 18 October 2026 from NAVs to 16 October. ELSS series funds, segregated portfolios and ETFs are left out.

By category

Category Funds Positive At 1 or above Median Best Worst
Multi Cap 23 21 10 0.88 1.71 −0.09
Large & Mid Cap 26 24 5 0.59 1.83 −1.01
Large Cap 30 21 3 0.44 1.47 −0.60
Focused 27 19 4 0.42 1.51 −0.72
Value 21 16 3 0.37 2.04 −1.06
Flexi Cap 36 26 9 0.33 1.76 −0.52
Mid Cap 29 21 6 0.32 1.41 −0.85
ELSS 36 20 4 0.14 1.26 −1.17
Small Cap 26 15 5 0.12 1.90 −0.63
All 254 183 49 0.42 2.04 −1.17

Seventy-two per cent of the funds (183) are positive, which is to say they beat their benchmark over the window. 49 reached 1 or above. Multi Cap stands out: 21 of its 23 funds are positive and the middle fund scores 0.88. At the other end, ELSS and Small Cap have medians near 0.1 and more than two-fifths of their funds below zero (16 of 36 in ELSS, 11 of 26 in Small Cap).

The top fund in each category

Category Fund Info ratio Tracking error 3-year return
Value HDFC Value 2.04 2.60% 14.9%
Small Cap Bandhan Small Cap 1.90 4.97% 22.7%
Large & Mid Cap Bandhan Large & Mid Cap 1.83 3.80% 16.4%
Flexi Cap Aditya Birla Sun Life Flexi Cap 1.76 2.40% 14.0%
Multi Cap Axis Multicap 1.71 5.29% 17.8%
Focused ITI Focused 1.51 4.60% 15.5%
Large Cap WhiteOak Capital Large Cap 1.47 2.81% 12.4%
Mid Cap ICICI Prudential Mid Cap 1.41 4.32% 18.9%
ELSS WhiteOak Capital ELSS Tax Saver 1.26 4.42% 14.9%

Tracking error is the annual variability of the gap to the benchmark. The Value and Flexi Cap leaders have the lowest (2.60% and 2.40%): they stayed close to their index and still beat it consistently, which is what a high information ratio rewards. The Small Cap and Multi Cap leaders carry tracking errors of about 5%, so their ratio comes from a larger lead.

Information ratio is not the same as return

The leaders' three-year returns run from 12.4% to 22.7%, and the highest ratio in the table (HDFC Value, 2.04) belongs to a fund returning 14.9%, below the Small Cap and Mid Cap leaders. The metric compares each fund with its own yardstick, so a Large Cap fund can top its category on it with a 12.4% return (WhiteOak Capital Large Cap) while a higher-returning fund in another category scores lower.

Reading it sensibly

  • Active funds are being asked the right question here. The ratio only means something for funds that try to beat an index; for an index fund the gap is the cost, see our tracking error study.
  • Combine it with other measures. Positive alpha tells you whether the excess return was there at all; the information ratio tells you how smoothly. Neither says what happens next.
  • Benchmark choice matters. All of this is measured against the total return index WealthTicker assigns. A different benchmark would move the numbers.
  • Over three years, one strong stretch can dominate. The window is short enough that a category-wide rally can lift many funds at once.

Nothing here is a recommendation to buy or sell a fund. The year-by-year version of the question, how many funds beat their index, is in how many equity funds beat their index each year.

Source: WealthTicker fund metrics (information ratio, tracking error, alpha) for Direct Growth plans with three years of NAV history, to 16 October 2026; benchmarks are total return indices.

Frequently asked questions

What does the information ratio measure?

It divides a fund's return above its benchmark by its tracking error, the variability of that difference. A positive number means the fund beat the benchmark, and a higher one means it did so more steadily. Above 1 is a strong reading.

Which category has the best information ratios?

Multi Cap: 21 of 23 funds are positive, 10 are at 1 or above, and the median is 0.88. Small Cap has the lowest median, 0.12, with 15 of 26 positive, and ELSS is next at 0.14 with 20 of 36.

Does a high information ratio mean the fund will keep beating its benchmark?

No. It describes the past window. It also depends on the benchmark chosen, here the total return index WealthTicker assigns each fund, and a fund that beat a narrow benchmark can look different against another.

This is commentary on published data, not investment advice. WealthTicker is not a SEBI-registered adviser or distributor. Figures are WealthTicker’s own calculations from public data — AMFI’s fund NAVs and disclosures, NSE’s index and FII/DII files, and the fund houses’ monthly portfolios (how we calculate). They are as of the dates stated and can be revised by their source.

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