Small and midcap funds gave the highest returns among all mutual fund categories in 2014. Small and midcap funds on an average gave nearly 75% returns in 2014. However, one should not compare the returns of large cap and midcap funds, since midcap funds intrinsically carry more risk than large cap funds. If you look at the returns of the midcap over the last three years, you will notice that midcap funds outperformed large cap funds in bull markets, but their performance was weaker when market was subdued. The chart below shows the annual returns of small and cap funds from 2012 to 2014.
