4 Top-Performing Small-Value Funds

Although small value stock strategies have lagged the overall market in recent years, the long-term outperformance of such stocks has been empirically demonstrated since at least the 1990s. However, this performance can come with significant volatility.

We screened for the small-value funds with the best returns over the last one-, three-, and five-year periods. All funds that passed the screen are actively managed.

• DFA US Targeted Value Portfolio DFFVX
• Diamond Hill Small Cap Fund DHSYX
• Fidelity Small Cap Value Fund FIKNX
• Invesco Small Cap Value Fund SMVSX

Over the last 12 months, the small-value category has returned 3.12%. On an annualized rate, these funds have returned 9.35% over the last three years and 12.93% over the last five. Meanwhile, the Morningstar US Market Index has returned 18.49% over the last 12 months, 22.98% per year over the last three years, and 14.97% per year over the last five years.

Screening for the Top-Performing Small-Value Funds

Small-value portfolios invest in US companies with valuations and growth rates below other small-cap peers. Stocks in the bottom 10% of the capitalization of the US equity market are defined as small-cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

We looked at returns 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.

DFA US Targeted Value Portfolio

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

The $13.4 billion fund has gained 4.83% over the past 12 months, while the average fund in its category is up 3.12%. The Dimensional fund, launched in February 2000, has climbed 10.91% over the past three years and 16.80% over the past five.

“DFA US Targeted Value Portfolio follows a time-tested process focused on the small-value segment of the US market. Its broad portfolio, cost-effective execution, and competitive fee should give it a long-term advantage.

“The portfolio lands among the broadest and most diversified in the small-value Morningstar Category. It holds more than 1,400 stocks, while its 10 largest positions represent about 7% of assets. The fund’s price/book ratio has been similar to the Russell 2000 Value Index. But including mid-cap stocks and tilting toward profitable firms means the portfolio’s average market cap and profitability have been higher than the index’s.

“The mutual fund beat the Russell 2000 Value Index by 2 percentage points per year over the 10 years through December 2024. Keeping a lid on trading costs contributed to its outperformance.”

—Daniel Sotiroff, senior analyst

Diamond Hill Small Cap Fund

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

The $211.7 million fund has gained 6.02% over the past 12 months, while the average fund in its category is up 3.12%. The fund, launched in December 2011, has climbed 13.98% over the past three years and 14.28% over the past five.

“Aaron Monroe has settled in as the strategy’s lead manager. He has been coming up with buy, sell, and portfolio adjustment ideas as a listed manager since February 2017, first with former marquee manager Tom Schindler, then with Diamond Hill Small-Mid Cap manager Chris Welch from February 2019 to March 2023 when he officially took over as lead here. Monroe, who was an analyst at the firm for 10 years before becoming a manager, is steeped in the firm’s intrinsic value approach.

“Monroe has put his stamp on the strategy without departing from the house philosophy. Schindler tended to hold a lot of cash and mid-cap stocks, and sometimes bonds. Monroe, first with Welch and now on his own, doesn’t hold much cash and has moved much farther down the market-cap ladder. At the end of May 2025, the fund had 67% assets in micro-caps, more than the Russell 2000 Value Index’s 62% stake and nearly 80% of its small-value Morningstar Category rivals. The fund has a big micro-cap stake, up from a little more than half the portfolio’s assets a year earlier, partially because that is where Monroe has been finding opportunities and partly because he also runs a micro-cap limited partnership for the firm with two Diamond Hill analysts.

“The fund uses the same process regardless of the market cap. Like other Diamond Hill managers, Monroe relies on fundamental analysis to find stocks with share prices under their estimated intrinsic values. He likes companies with skilled leaders, durable competitive advantages, and stable cash flows, but will buy cyclical companies with depressed quality measures, such as returns on assets and returns on equity, if their share discounts are appealing.”

—Dan Culloton, senior principal

Fidelity Small Cap Value Fund

• Morningstar Medalist Rating: Bronze
• Morningstar Rating: ★★★★

Over the past 12 months, the Fidelity fund rose 5.08%, while the average fund in its category rose 3.12%. The fund, launched in October 2018, has climbed 11.53% over the past three years and 14.72% over the past five.

“This strategy recognizes that tilting toward quality is a way to win when competing against the Russell 2000 Value Index, which contains many unprofitable, low-quality businesses that tend to lag profitable, higher-quality ones over the long term. To that end, manager Gabriela Kelleher targets strong, predictable businesses with durable competitive advantages and long-term reinvestment opportunities.

“From Kelleher’s start as co-manager in May 2021 through September 2025, the strategy’s total and risk-adjusted returns beat the small-value Morningstar Category average and Russell 2000 Value Index thanks to strong stock picks across most sectors. The strategy also beat the S&P Small Cap 600 Index, which excludes many unprofitable businesses, so it’s another relevant comparison given the strategy’s quality-oriented approach.”

—Eric Schultz, analyst

Invesco Small Cap Value Fund

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

Over the past 12 months, the Invesco fund rose 11.07%, while the average fund in its category rose 3.12%. The fund, launched in February 2017, has climbed 19.50% over the past three years and 24.28% over the past five.

“Lead manager Jonathan Edwards has a long and successful history with this strategy. After joining the firm in 2001, he was promoted to comanager in 2010 before taking over as lead manager in 2018. Edwards plays an integral role, as he helps guide the team’s research efforts and is responsible for portfolio construction. Still, the strategy’s approach is collaborative. Edwards works with a small but stable four-person team that has been together for over six years.

“Under Edwards’ guidance, this strategy has built an incredible record. Since he became lead manager in June 2018 through July 2025, the A share class’ 13.2% annualized gain easily outpaced its Russell 2000 Value Index prospectus benchmark and the Russell 2500 Value Index (another relevant bogy, given the strategy’s larger market-cap tilt) by 8.1 and 6.2 percentage points, respectively. Recent results have continued to impress, though it’s unlikely to outperform at this rate forever. The strategy also tends to be one of the most volatile in its small-value Morningstar Category. But over the long run, this fund should deliver.”

—Tony Thorn, analyst