New Delhi: Retail investors are increasingly investing in India's small- and mid-cap mutual funds, motivated by higher returns, structural tailwinds, and regulatory reforms, a report said on Monday. Net AUM of mid-cap funds increased by 10.9 per cent on YoY basis at Rs 4.27 lakh crore, while that of small-cap funds increased by 9.56 per cent YoY at Rs 3.51 lakh crore in August 2025. Net AUM of large-cap funds increased by 5.86 per cent YoY at Rs 3.90 lakh crore. As of August 31, 2025, one-year returns (-3.8 per cent) for large-cap funds, (-3.9 per cent) for mid-cap funds, and (- 6.4 per cent) for small-cap funds. Three-year returns were 13.5 per cent, 19.6 per cent, and 19.3 per cent for large-cap, mid-cap and small-cap funds respectively.