4 Top-Performing Mid-Cap Blend Funds

Mid-cap stock funds can offer earlier access to growing companies than large-cap funds while adding less volatility to a portfolio than small-cap funds. All four of these funds offer a solid track record of returns.

To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. Offerings from Vanguard stood out, taking up two of the four funds.

• Vanguard Strategic Equity Fund VSEQX
• Vanguard US Momentum Factor ETF VFMO
• WisdomTree US Multifactor Fund USMF
• Xtrackers Russell US Multifactor ETF DEUS

Over the last 12 months, mid-cap blend funds have returned 9.21%. On an annualized rate, these funds have returned 9.18% over the last three years and 11.30% over the last five years. That compares with the Morningstar US Market Index, which has returned 14.03% over the last 12 months, 15.68% per year over the last three years, and 14.54% per year over the last five years.

What Are Mid-Cap Blend Funds?

The typical mid-cap blend portfolio invests in US stocks of various sizes and styles, giving it a middle-of-the-road profile. Most shy away from high-priced growth stocks, but aren’t so price-conscious that they land in value territory. The US mid-cap range for market capitalization typically falls at $1 billion-$8 billion and represents 20% of the total capitalization of the US equity market. The blend style is assigned to portfolios where neither growth nor value characteristics predominate.

Screening for the Top-Performing Mid-Cap Blend Funds

We looked at returns data from the past one, three, and five years using Morningstar Direct. We screened for open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with Morningstar Medalist Ratings of Bronze, Silver, or Gold. We excluded funds with assets under $100 million and analyst coverage that was not 100%. This left four names.

Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors outside of retirement plans, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. In addition, Medalist Ratings may differ among the share classes of a fund.

Vanguard Strategic Equity Fund

• Morningstar Medalist Rating: Gold
• Morningstar Rating: ★★★★

Over the past year, the $8.8 billion Vanguard Strategic Equity Fund rose 11.09%, while the average fund in its category rose 9.21%. The Vanguard fund, launched in August 1995, has climbed 11.21% over the past three years and 14.55% over the past five.

“Vanguard Strategic Equity’s methodical lead manager substantially enhanced the systematic process here, driving an upgrade of its Process rating to Above Average to match its Above Average People rating. Portfolio manager Cesar Orosco took the helm here in February 2021 and patiently but firmly reshaped the approach here to pursue its historical philosophy.

“Orosco prudently waited to dramatically change the strategy’s systematic model for a year while studying it to develop and test potential enhancements. Still, small initial changes were meaningful: The stock count increased to about 530 from roughly 350; a sixth quantitative factor set, using short interest to provide defense, joined the preexisting mix of earnings growth, quality, management decisions, momentum, and valuation. But the crucial change came in February 2023 when the team launched its machine-learning artificial intelligence engine. It runs parallel to the traditional quant model on the same six themes but adjusts dynamically and rapidly to changing market conditions. As it nears the two-year mark, it has performed according to plan in various environments, earning the Process rating upgrade to Above Average.

“Its strong outperformance may not persist at this level forever, but this quant vehicle is built for gradual, all-weather outperformance and ongoing improvements.”

—Todd Trubey, senior analyst

Vanguard US Momentum Factor ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★★

Over the past year, the $1.1 billion Vanguard US Momentum Factor ETF rose 14.10%, while the average fund in its category rose 9.21%. The Vanguard fund, which launched in February 2018, has climbed 13.84% over the past three years and 15.69% over the past five.

“Vanguard US Momentum Factor ETF is a meticulous fund that delivers cheap, reliable exposure to the momentum factor, a proven factor that should generate a durable performance edge over the long haul. Momentum is worth targeting. It describes the tendency for under- or outperforming stocks to sustain their trend in the near term, a simple phenomenon that has historically generated market-beating returns for strategies that channel it. This rules-based strategy tries its hand by sweeping in high-momentum stocks from the large-, mid-, and small-cap markets and weighting them by the strength of their momentum. This approach has worked so far. The fund’s returns have been closely correlated with the momentum factor, and top marks on the forward-looking Morningstar Risk Model indicate it should continue.

“This fund avoids stock-specific risks, a common drawback in rival momentum strategies. Pulling stocks from the complete market and weighting them by momentum breeds a portfolio ranging from 500 to 750 holdings, the top 10 of which have never exceeded 15% of the portfolio. This breadth ensures that momentum drives returns—not individual company bets. Despite its deep roster, this fund looks quite different than the broad market and Russell Midcap Index, its Morningstar Category benchmark. Just 24% of its portfolio overlapped with the Russell 3000, the index it draws stocks from, midway through 2024. Pronounced momentum exposure requires differentiation, but that can spark volatile benchmark-relative returns. Investors should exercise patience to reap this fund’s rewards.”

—Ryan Jackson, senior analyst

WisdomTree US Multifactor Fund

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

Over the past year, the $404.8 million WisdomTree US Multifactor Fund rose 13.41%, while the average fund in its category rose 9.21%. The WisdomTree fund, launched in June 2017, has climbed 11.21% over the past three years and 12.13% over the past five.

“WisdomTree US Multifactor ETF’s diversified exposure to a series of time-tested risk factors and defensive tint give it a compelling risk/reward profile that should grade better than the Russell Midcap Index, its Morningstar Category benchmark. This index strategy features stocks with the best exposure to a quartet of risk factors–value, quality, momentum, and correlation–that should enhance returns and rein in volatility. It favors stocks with balanced multifactor exposure to those that excel in one area but lack in others, precipitating pronounced portfolio-level factor tilts. Value, quality, and momentum’s proven track record of market-beating performance makes them attractive pursuits.

“The fund’s inverse-volatility weighting approach emphasizes the portfolio’s sturdiest firms, and a relatively large market-cap orientation adds to the defensive profile.

“This strategy plucks just 200 stocks from the starting universe, a selective policy that makes it look a lot different from the Russell Midcap Index. It tends to share less than 20% of its portfolio with that benchmark. Investors should not be surprised to see such a differentiated fund out- or underperform the category benchmark by a wide margin. The risk should pay off over the long run, as the fund’s targeted factors should prove worthy reasons to break from the market.”

—Ryan Jackson, senior analyst

Xtrackers Russell US Multifactor ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

The $157.8 million fund has climbed 12.12% over the past year, outperforming the average fund in its category, which rose 9.21%. The Xtrackers fund, which launched in November 2015, has climbed 11.11% over the past three years and gained 11.92% over the past five years.

“Xtrackers Russell US Multifactor ETF provides balanced exposure to a handful of time-tested risk factors and effectively diversifies risk, which should give it a leg up on the Morningstar Mid-Cap Index over the long term. This index strategy starts with the Russell 1000 Index constituents and tilts toward those with the best combination of value, quality, momentum, size, and low-volatility characteristics. Each of these factors has historically enhanced returns or reduced risk, but they are prone to slumps.

“Strategies built based on a composite factor score can look a lot different from the market, but this fund shared nearly half its portfolio with the Morningstar Mid-Cap Index as of October 2024. Performance shouldn’t wander too far from the Morningstar Category benchmark, but the fund has the space it needs to build an edge and recoup its competitive fee. The fund casts a wide net that leaves it well-diversified at several levels. It normally ranges between 800 and 850 holdings, the top 10 of which constitute 5%-10% of the portfolio.

“Single sectors rarely crack one fifth of assets. And while the small-size component pulls it into the mid-cap territory, the fund features most of the large- and mega-cap firms that shape the Russell 1000 Index. Incorporating quality and low volatility into index construction gives this fund a defensive posture. From its November 2015 inception through October 2024, it posted shallower drawdowns and lower volatility than the Morningstar Mid-Cap Index. Pairing that stability with competitive returns translated into a Sharpe ratio, a measure of risk-adjusted returns, that beat the category index and ranked in the mid-blend peer group’s top quartile.”

—Ryan Jackson, senior analyst