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Mixed

Hidden Gems

These top-rated funds haven’t yet attracted a lot of attention—and that can be a good thing.

List of investments
Name
Ticker
Category
Morningstar Analyst Rating
World Bond
World Large Stock
Foreign Large Blend
World Small/Mid Stock
High Yield Muni
Large Growth
Global Real Estate
Small Value
Foreign Large Blend
Large Growth
Pacific/Asia ex-Japan Stk
Foreign Large Blend
Large Growth
Pacific/Asia ex-Japan Stk
Small Blend
Foreign Large Value
Large Blend
Large Growth
World Bond
Global Real Estate
World Large Stock
World Large Stock
Foreign Large Growth
Multialternative
Foreign Large Blend
Multialternative
World Bond
Large Value
Large Growth
Long-Short Equity
Small Blend
Small Blend
Intermediate Core Bond
Pacific/Asia ex-Japan Stk
World Large Stock
World Large Stock
Large Value
Real Estate
Multialternative
Multialternative
Emerging-Markets Local-Currency Bond
Miscellaneous Region
Large Value
Real Estate
Foreign Large Growth
Small Growth
Small Blend
Foreign Large Growth
High Yield Bond
Large Value
China Region
Managed Futures
High Yield Bond
Large Value
Real Estate
Managed Futures
Foreign Large Blend
Small Blend

Not all of our top-rated funds are swinging around huge asset bases. Some of our analysts’ top choices haven’t yet attracted much attention from investors, which could turn out to be a long-term competitive advantage for these funds. After all, smaller funds can more readily build and subtract from positions without affecting the share prices of the securities they’re aiming to buy and sell. That’s a luxury that very large funds don’t have and is a particular benefit for managers who traffic in small, mid-, or even smaller large caps. To help shine the light on our high-conviction funds that haven’t yet attracted much in assets, we screened for all funds that are currently rated Gold, Silver, or Bronze with an asset-base of $500 million or less.

List Criteria

Fund Size: Less Than $500 Million

The funds on this list have less than $500 million in assets under management. This can be a big advantage for active funds, allowing them to opportunistically get into and out of smaller companies without affecting the share price. Smaller positions (in dollar terms) in specific investments can also be more meaningful when a fund is managing less money overall.

Medalist Funds (Gold, Silver, or Bronze)

The Analyst Rating for Funds is based on our fund analysts’ conviction in 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. 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.

Active Funds

We excluded index funds from this list to target only actively managed mutual funds. Unlike passive funds, which aim to mirror the return of an index, active managers aim to beat a benchmark or achieve another goal (for instance, absolute returns) through investment selection, sector rotation, staying out of the market (by holding cash), or other strategies. Some active managers have broad mandates and can invest almost anywhere, while others are restricted to certain areas of the market. It’s important for investors to understand an active fund’s strategy, as many of the best active funds can be out of step with the market for certain periods.

No-Load Funds

This list includes only no-load funds. “No load” refers to a mutual fund that does not charge a fee (known as a load) for buying or selling its shares; the investor typically buys no-load funds directly from a fund company or through a fund supermarket. Load funds, on the other hand, are sold by an advisor or broker and charge a percentage fee at purchase or sale of the shares, which is meant to be compensation for the planner’s investment-selection advice. (Note: Not all advisors sell load funds. Many are compensated via a flat fee or a percentage of all assets under management.) Whether a fund charges a load or not isn’t a reflection of its underlying quality. Many load funds are also Medalists, and some load funds are available without a load through 401(k) or other retirement plans. But we’re including only no-load funds here, since this list is designed to help investors who are primarily doing their own fund-picking.

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.

Distinct Portfolios Only

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. Screening for “distinct portfolios only” removes all but one of these options to avoid having several share classes of the same offering cluttering the list. Morningstar normally designates the oldest share class as the distinct portfolio. In some cases, this share class may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. In those cases, investors may want to consider an “investor” share class of the same fund, though the fund expenses may be higher for those share classes.