How 4 Small-Growth Funds Have Fared As Their Category Struggles

Small-growth investors have spent five years in a market that keeps punishing the traits that most funds in this Morningstar Category are built on. Since a brief rally that favored profitability and strong balance sheets in 2022, this segment has been led by a narrow, high-beta cohort of artificial intelligence infrastructure names.

That backdrop helps contextualize recent returns in light of more long-term-oriented, quality-conscious investment processes that have not been consistently favored in recent years.

Neuberger Genesis

Neuberger Genesis NBGNX earns Above Average People and Process ratings for an experienced team and a quality-focused approach that has changed little over time. The managers insist on holding profitable companies at reasonable valuations.

Recent returns show both sides of that discipline. Over a five-year trailing period through September 2026, Genesis trailed its average small-growth category peer by more than 40 basis points per year, a gap that widened as software holdings such as Vertex VERX and SPS Commerce SPSC came under threat from AI disruption in 2025.

More recently, the pattern has begun to reverse, as the fund finished October 2026 more than 300 basis points ahead of peers on the year.

Loomis Sayles Small Cap Growth

Loomis Sayles has navigated this market somewhat better. Loomis Sayles Small Cap Growth LCGRX managers Mark Burns and John Slavik pursue companies with durable growth opportunities while placing considerable emphasis on risk management. Broad diversification and constraints on exposure to unprofitable and recently public companies keep the portfolio from becoming a momentum bet.

The fund holds High Process and Above Average People ratings, and its results have held up across market regimes. In the past five years through September 2026, Loomis Sayles beat its average small-growth peer by roughly 110 basis points per year. This outperformance came partly on the strength of biotech names such as Verona Pharma, Twist Bioscience TWST, and Insmed INSM, which together contributed 5.2 percentage points in active return.

While the fund has not escaped every difficult environment, a measured allocation to more-speculative growth stocks has helped it participate in market surges.

Baron Discovery

Since Baron Discovery’s BDFFX inception, comanagers Randy Gwirtzman and Laird Bieger have put together a track record that merits confidence in their stock-picking ability, which, in 2025, resulted in an upgrade to the strategy’s People rating to High from Above Average. While long-term returns remain excellent for Baron Discovery, they’ve disappointed in recent years.

Through September 2026, the fund roughly broke even on a five-year trailing basis, whereas small-growth category peers gained more than 2.9% per year. Portfolio laggards over this period included Onterris ONT, SiteOne Landscape Supply SITE, and GitLab GTLB.

Fidelity Small Cap Growth

Fidelity Small Cap Growth’s FCPGX diversified approach is part of Patrick Venanzi and Slava Kruzement-Prykhodko’s broader strategy, which looks for companies with above-average growth prospects while avoiding large factor bets. The fund typically holds over 300 stocks, which may make it more likely to catch exposure to fast-emerging winners than its more concentrated peers.

The strategy has participated in the recent quality rally, buoyed by holdings tied to industrial and technology spending, such as Bloom Energy BE and Aehr Test Systems AEHR, building on a five-year trailing return through September 2026 that comes in nearly 400 basis points annualized ahead of the category average.

This article first appeared in the October 2026 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting this website.