Small-Cap Funds

In a notoriously risky arena, these quality funds have largely kept a lid on volatility.

Although it makes sense to anchor the stock sleeve of a portfolio in high-quality, wide-moat blue chips, diversification across the style box will ensure at least some participation in all market environments. Small caps are generally considered to be more volatile than large, and that’s borne out by higher standard deviations relative to large caps over time. Because their businesses aren’t as diverse and their financial health may not be as strong as large firms, small caps as a group tend to struggle more than large firms in recessionary environments. But they can also outperform when the winds change. For this list, we looked for highly rated small-cap funds (value, growth, and blend), but also screened out any funds that had above-average Morningstar Risk Ratings. Though small caps can be a roller coaster, investors in these funds have had a somewhat smoother ride.

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Name	Ticker	Morningstar Category	Morningstar Rating for Funds Overall	Total Return 1 Year	Total Return 3 Year	Total Return 5 Year
Applied Finance Explorer Investor	AFDVX	Small Value		25.10%	7.24%	14.78%
Htbbk Ngwlhrd Fhwx Xnpdx Xp Ywkrnf	XLTZQ	Small Growth		6.74%	−11.58%	−0.03%
Lvrvqzvh Cbgyk Phh Sdhnsv Nxbjgcm	GHJRT	Small Growth		11.26%	1.60%	12.37%
PGZ Ckhpq Gqg Btpkzk	BMMVC	Small Growth		11.32%	3.94%	10.31%
HSL Ppyzbn Vsbw Vcfpp Zhd Zbdgx Sjsrlpqt	MFVLL	Small Value		18.21%	3.50%	—
PDY Hthwhv Bgrf Wzsjs Hlf Vzkfz Ysg	SCWTD	Small Value		18.15%	3.43%	9.47%
Rngrtssj HPSB Xgcftfjj Vmhrdg Bdmxqldv	SYFV	Small Blend		17.30%	0.04%	8.05%
Byzprxq Mytcdlrjc Jf Cb Xdk Pzmynk	DNCFHH	Small Value		25.81%	6.47%	9.72%
QvjthrQsgwfx Tmmrvwqxlp Qj-Dh Pt T	JTGB	Small Growth		40.06%	6.00%	16.13%
PYG Qbqht Wcf Ryfbnvx Mqdh Rmfrt SGRY	DSSW	Small Growth	—	20.20%	—	—
XFT Cwmjf Zqy Qgfsfvf P	ZJNP	Small Growth	—	20.07%	—	—
FLL Fpcyt Wrq Qsnvrdm JZBM	KFFV	Small Growth	—	20.09%	—	—
Qypj Dgzxj Ywwfj-Jwc Rsrrdg Njrjf	RVNJX	Small Growth		27.28%	−0.27%	13.90%
Gcxgdyxt Ftqzbdg Gldfygj ZVN	MXPXD	Small Growth		11.65%	−0.81%	6.93%
Hxpgyr Nrmtl Nyzgt Zwf Vqcznp Zbbnznqjhl	TKSB	Small Blend		20.55%	1.95%	8.43%
Lpskzg Wvdqz Srmxq Nsl Tnnjfg Sbbz	MMYH	Small Blend		20.44%	1.86%	8.34%
Bhmprq Bgtrv Zdtrf Hnj Knqnmx Cmgjv	HDPML	Small Blend		20.28%	1.72%	8.20%
Rfsrlh Jhgcl Cmntb/Mlb Frj Hm Sfwk	RQFLF	Small Blend		24.78%	4.31%	11.66%
Crlygg Tcclz Bwqqg/Hmm Lkx Qn Ssvtm	KCTY	Small Blend		24.70%	4.24%	11.56%
Brpfyb Vbmqb Trjmb/Pwc Pcn Pm Sjkrsrz	BHTGP	Small Blend		24.41%	4.05%	11.34%
Phyrmvdr Ppfhx-Kscl	SQNB	Small Growth		16.59%	6.96%	15.00%
Rfrwbbsw Khcnc-Mcf Hkdwlswhbjt	ZSHGQJ	Small Growth		20.05%	8.86%	16.46%
Vxnrdcrnq Vlqrmscc Qlxwt-Xwl Hbzl	DSWBY	Small Blend		17.11%	0.06%	8.48%
Hvvzplkb Clht Zpshn Htj Twkmhs	KNWRSZT	Small Value	—	16.96%	—	—
Dmzqd Jqmn Rbrhj Xzq Pqncdjbwzmxbc Qtz	MCLNC	Small Growth		18.88%	2.98%	9.77%
Gdglnlyj Kzthxbwxq Zjpvx-Rdf Dypqcs L	PZSTSR	Small Blend		22.73%	5.08%	10.28%
Hqsqbvnkqkq MM Yshdp Bsy Gj	TZMRV	Small Value		24.14%	5.54%	10.19%
Tccqvsh Shlr Hgqcddms	QVMNS	Small Growth		22.06%	−1.70%	9.72%
Pcwbktf Tjnjm	BNYJF	Small Growth		21.66%	−11.27%	8.51%
Wlgtqql Pkhfh Xjt Vzq	SFHTKZ	Small Growth		15.10%	−4.82%	9.59%
Mvsnqgw Xddfv Bhv Lffsxb Bctqljnk	HLHQL	Small Growth		12.33%	−11.48%	5.52%
Ngndtcq Lcxbf Rcq Ybjzm	WZRC	Small Blend		27.35%	2.72%	9.05%
Nmbxvcm Xcbng Nwgyrlmqf	LBGZSF	Small Growth		11.87%	−12.72%	6.84%
Bjjrfyfgg B&T JwtcdYtm 126 FWB CN	JWML	Small Blend		17.67%	1.03%	—
rGprwys Tnbpfvh Trvkp/Crg-Xbg Nbv Sby	BFYDC	Small Blend		16.62%	−0.76%	7.74%

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List Criteria

Small-Cap U.S. Funds

Rather than a fixed number of “large cap” or “small cap” stocks, Morningstar uses a flexible categorization system that isn’t adversely affected by overall movements in the market. Large-cap stocks are defined as the group that accounts for the top 70% of the capitalization of each geographic area; mid-cap stocks represent the next 20%. Small-cap stocks represent the balance.

Gold-Rated Funds

The Medalist Rating for funds reflects our forward-looking assessment of a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. We assign the ratings on a five-tier scale with three positive (Medalist) ratings of Gold, Silver, and Bronze; a Neutral rating; and a Negative rating. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.

Morningstar Risk: Average or Below

The Morningstar Risk Rating sizes up the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to similar funds. In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund.

Open to New Investment

All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.

Share Class Exclusions Applied

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. In some cases, certain share classes may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. We've limited our list to funds that are primarily used by and available to individual, or retail, investors.