When it comes to mutual fund investing, risk-adjusted returns matter more than just high returns. A fund that generates consistent returns with controlled risk is far more efficient than one that delivers volatile growth. The Sharpe Ratio is one of the most reliable indicators to assess this efficiency. It measures how much excess return a fund delivers for every unit of risk it takes. In this article, we have shortlisted 10 mutual funds with the best risk-adjusted returns to invest in 2025, based on their Sharpe Ratios. These funds have delivered impressive growth while maintaining a strong balance between return and volatility.
Investors can also check 10 Mutual Funds That Crashed the Most Since Last Diwali (-14% to -17%).
What is a Sharpe Ratio and Why It Matters
The Sharpe Ratio measures how much excess return a mutual fund generates per unit of total risk (standard deviation). A higher Sharpe Ratio means better risk-adjusted performance.
How to interpret Sharpe Ratio:
- A higher Sharpe Ratio indicates better efficiency in managing risk.
- Funds with Sharpe Ratio above 1.0 are considered strong performers.
- It allows comparison across categories — large cap, mid cap, or sectoral — to identify truly efficient funds.
How We Identified These Funds
To find the best-performing funds with high risk-adjusted returns, we used the following criteria:
- Considered all open-ended equity mutual funds as of 24-Oct-2025.
- Considered only direct plans in mutual funds.
- Selected only funds high Sharpe Ratios.
- Filtered top 10 funds that has high sharpe ratio above 1.5. We could get 10 mutual funds here.
These funds not only generated high absolute returns but also demonstrated efficiency in risk management.
List of Mutual Funds with Risk-Adjusted Returns (Based on Sharpe Ratio)
| S.No | Mutual Fund Scheme | Sharpe Ratio |
|---|---|---|
| 1 | Mirae Asset NYSE FANG+ ETF FoF | 1.91 |
| 2 | Parag Parikh Flexi Cap Fund | 1.72 |
| 3 | Mirae Asset S&P 500 Top 50 ETF FoF | 1.63 |
| 4 | Invesco India – Invesco Global Equity Income FoF | 1.61 |
| 5 | HDFC Developed World Overseas Equity Passive FoF | 1.59 |
| 6 | HDFC Focused Fund | 1.59 |
| 7 | Mirae Asset Global X Artificial Intelligence & Technology ETF FoF | 1.54 |
| 8 | ICICI Prudential NASDAQ 100 Index Fund | 1.53 |
| 9 | Navi US NASDAQ 100 FoF | 1.52 |
| 10 | Axis Global Equity Alpha FoF | 1.50 |
Top 10 Mutual Funds with Best Risk-Adjusted Returns in 2025
#1 – Mirae Asset NYSE FANG+ ETF FoF
Investment Objective: To provide long-term capital appreciation by investing in the NYSE FANG+ Index comprising global tech leaders.
Performance Metrics:
- 3-Year Return: 64.7%
- 5-Year Return: Not Applicable
- 10-Year Return: Not Applicable
Why to Invest:
- Focused on the world’s leading tech companies.
- Strong Sharpe Ratio (1.91) indicates superior risk-adjusted efficiency.
Risk Factors:
- Heavily concentrated in global technology stocks; may face volatility during tech corrections.
This is also one of the 10 Mutual Funds that outperformed with 74% since last Diwali.
#2 – Parag Parikh Flexi Cap Fund
Investment Objective: To generate long-term capital appreciation by investing in Indian and global equities across market caps.
Performance Metrics:
- 3-Year Return: 22.7%
- 5-Year Return: 23.4%
- 10-Year Return: 18.8%
Why to Invest:
- Diversified exposure across Indian and international equities.
- Consistent performance with low risk grade and above-average return grade.
Risk Factors:
- Overseas exposure may lead to currency fluctuation impact.
#3 – Mirae Asset S&P 500 Top 50 ETF FoF
Investment Objective: To mirror the performance of the S&P 500 Top 50 Index through ETF investments.
Performance Metrics:
- 3-Year Return: 38.9%
- 5-Year Return: Not Applicable
- 10-Year Return: Not Applicable
Why to Invest:
- Ideal for investors seeking exposure to U.S. large-cap companies.
- Maintains a healthy Sharpe Ratio (1.63) due to consistent global equity performance.
Risk Factors:
- Dependent on U.S. market trends; global macro risks may affect performance.
We explored this fund in 15 Mutual Funds that Outperformed in the last 3 years with 219% absolute returns.
#4 – Invesco India – Invesco Global Equity Income FoF
Investment Objective: To generate long-term returns by investing in high-dividend-paying global equities.
Performance Metrics:
- 3-Year Return: 28.4%
- 5-Year Return: 19.6%
- 10-Year Return: 12.3%
Why to Invest:
- Balanced portfolio combining income and growth potential.
- Sharpe Ratio (1.61) reflects efficient performance with moderate volatility.
Risk Factors:
- Global dividend strategies may underperform during aggressive growth phases.
#5 – HDFC Developed World Overseas Equity Passive FoF
Investment Objective: To invest in developed market equities through overseas ETFs tracking global indices.
Performance Metrics:
- 3-Year Return: 24.4%
- 5-Year Return: Not Applicable
- 10-Year Return: Not Applicable
Why to Invest:
- Passive fund offering diversification across U.S., Europe, and Japan.
- Sharpe Ratio (1.59) highlights strong risk-adjusted efficiency.
Risk Factors:
- Performance depends on global ETF tracking efficiency.
#6 – HDFC Focused Fund
Investment Objective: To generate capital appreciation through a concentrated portfolio of quality Indian stocks.
Performance Metrics:
- 3-Year Return: 24.3%
- 5-Year Return: 30.4%
- 10-Year Return: 16.0%
Why to Invest:
- Proven long-term performer with High Return Grade and Low Risk Grade.
- Sharpe Ratio (1.59) validates superior risk-adjusted returns.
Risk Factors:
- Concentrated exposure increases sensitivity to underperforming stocks.
We reviewed this fund as part of 12 High Return Mutual Funds with Over 30% CAGR in the Last 5 Years.
#7 – Mirae Asset Global X Artificial Intelligence & Technology ETF FoF
Investment Objective: To invest in AI and technology-driven companies through global ETFs.
Performance Metrics:
- 3-Year Return: 40.3%
- 5-Year Return: Not Applicable
- 10-Year Return: Not Applicable
Why to Invest:
- Captures emerging trends in global tech and AI innovation.
- Sharpe Ratio (1.54) shows efficient returns despite high sector volatility.
Risk Factors:
- Sector-specific fund with potential volatility in global tech markets.
#8 – ICICI Prudential NASDAQ 100 Index Fund
Investment Objective: To replicate the NASDAQ 100 Index performance by investing in U.S. technology-driven companies.
Performance Metrics:
- 3-Year Return: 33.0%
- 5-Year Return: Not Applicable
- 10-Year Return: Not Applicable
Why to Invest:
- Offers investors a simple, low-cost way to participate in global innovation.
- Sharpe Ratio (1.53) demonstrates strong risk-adjusted consistency.
Risk Factors:
- U.S.-focused exposure can increase currency and valuation risks.
Nasdaq 100 Index is one of the consistent performing index which we re-iterated several times as well as among 15 Most Recommended Mutual Funds to invest in India.
#9 – Navi US NASDAQ 100 FoF
Investment Objective: To achieve capital appreciation by investing in units of overseas ETFs tracking the NASDAQ 100 Index.
Performance Metrics:
- 3-Year Return: 33.3%
- 5-Year Return: Not Applicable
- 10-Year Return: Not Applicable
Why to Invest:
- Offers access to top U.S. technology and growth-oriented companies.
- High Sharpe Ratio (1.52) reflects solid risk-return balance.
Risk Factors:
- Subject to global market volatility and USD-INR currency changes.
#10 – Axis Global Equity Alpha FoF
Investment Objective: To achieve long-term capital growth by investing primarily in global equity markets through ETFs.
Performance Metrics:
- 3-Year Return: 24.8%
- 5-Year Return: 16.9%
- 10-Year Return: Not Applicable
Why to Invest:
- Diversified global exposure with stable risk-adjusted performance.
- Sharpe Ratio (1.50) demonstrates efficient performance relative to peers.
Risk Factors:
- May underperform during domestic equity market rallies.
When this fund came for NFO in 2020, we reviewed it and indicated that this Axis Global Equity Alpha Fund of Fund (FoF) invests in existing fund that delivered 22% returns in 1 year – Should you invest or avoid.
Performance Summary Table – CAGR Returns
| Fund Name | 3-Year Return (%) | 5-Year Return (%) | 10-Year Return (%) |
|---|---|---|---|
| Mirae Asset NYSE FANG+ ETF FoF | 64.7 | — | — |
| Parag Parikh Flexi Cap Fund | 22.7 | 23.4 | 18.8 |
| Mirae Asset S&P 500 Top 50 ETF FoF | 38.9 | — | — |
| Invesco India – Invesco Global Equity Income FoF | 28.4 | 19.6 | 12.3 |
| HDFC Developed World Overseas Equity Passive FoF | 24.4 | — | — |
| HDFC Focused Fund | 24.3 | 30.4 | 16.0 |
| Mirae Asset Global X Artificial Intelligence & Technology ETF FoF | 40.3 | — | — |
| ICICI Prudential NASDAQ 100 Index Fund | 33.0 | — | — |
| Navi US NASDAQ 100 FoF | 33.3 | — | — |
| Axis Global Equity Alpha FoF | 24.8 | 16.9 | — |
Conclusion
The above mutual funds represent the top 10 performers with the best risk-adjusted returns in 2025, as per Sharpe Ratio. These funds have delivered strong long-term returns while maintaining efficient risk control. Investors looking for consistent compounding with balanced risk can consider these options for 2025 and beyond.
However, always remember to:
- Align fund choices with your investment goals and time horizon.
- Review fund performance periodically.
- Avoid chasing short-term momentum and focus on consistency.
These funds, backed by strong Sharpe Ratios and robust performance history, can serve as core holdings in an aggressive yet disciplined investment portfolio.
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Is these funds good for SIP, please advise
Yes
nice
nice blog
It seems most of them are international funds or US market based. One cannot build MF portfolio just based on these recommendations if starting from scratch.
sir…How to invest in Foreign MF FOF… almost all MFs stopped BULK & SIP.
No choice. We need to wait till they re-open for subscription