New Delhi, Aug. 10 -- Mutual fund investors often look at returns, risk, and fund size, but liquidity can become equally important during a market downturn. SEBI's FY26 annual report shows that small-cap funds could take longer than mid-cap funds to liquidate half of their portfolios.

During March 2026, the top 10 small-cap schemes by assets under management (AUM) required an average of 38 days to liquidate 50% of their portfolios, compared with 17 days for the top 10 mid-cap schemes.

Among the top five schemes, the average liquidation time was 51 days for small-cap funds, compared with 23 days for mid-cap funds.

Here's what experts say about the liquidity risks in mid- and small-cap funds.

"Small-cap funds are mandated to invest at l...