Linda Abu Mushrefova: Equities have been on a continuous upward trajectory since the conclusion of the financial crisis, and one area that has done particularly well has been mid-cap growth. Investing in funds that play lower down the market-cap spectrum can offer attractive diversification and risk-return characteristics.
Investors may be wary of mid-cap funds due to the potential of higher risk and lower liquidity of names. However, in the context of a well-diversified portfolio, these types of funds can actually lower the risk profile by offering less correlated returns. Further, many mid-cap managers make the argument that it is easier to produce outperformance in this area of the market due to higher inefficiencies.
We have identified several managers who have been able to provide investors with outperformance over the long term in this space. Two examples include Hartford MidCap and Oppenheimer Discovery Mid Cap Growth, both of which have a Morningstar Analyst Rating of Bronze. The two funds mentioned both have disciplined processes, good long-term performance, attractive fees, and are backed by experienced teams. The diversification benefits from investing in mid-cap growth funds as part of a well-diversified portfolio should serve investors well through a full market cycle and ensure that your portfolio is not overexposed to one area of the market.