New Delhi, Aug. 25 -- Active small-cap funds give fund managers the flexibility to make stock-selection and portfolio-allocation calls with the aim of generating alpha. However, the extent to which funds actually differentiate their portfolios from their benchmarks can vary significantly.

A recent analysis by Value Research highlights this difference by comparing the five small-cap funds with the highest and lowest benchmark overlap, along with their one-year performance.

Benchmark overlap measures the proportion of a fund's stock portfolio that is also present in its benchmark index. A higher overlap indicates that a larger part of the portfolio resembles the benchmark, while a lower overlap suggests greater deviation from the index. ...