Small-Cap Funds

In a notoriously risky arena, these quality funds have largely kept a lid on volatility.

Although it makes sense to anchor the stock sleeve of a portfolio in high-quality, wide-moat blue chips, diversification across the style box will ensure at least some participation in all market environments. Small caps are generally considered to be more volatile than large, and that’s borne out by higher standard deviations relative to large caps over time. Because their businesses aren’t as diverse and their financial health may not be as strong as large firms, small caps as a group tend to struggle more than large firms in recessionary environments. But they can also outperform when the winds change. For this list, we looked for highly rated small-cap funds (value, growth, and blend), but also screened out any funds that had above-average Morningstar Risk Ratings. Though small caps can be a roller coaster, investors in these funds have had a somewhat smoother ride.

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Name	Ticker	Morningstar Category	Morningstar Rating for Funds Overall	Total Return 1 Year	Total Return 3 Year	Total Return 5 Year
Applied Finance Explorer Investor	AFDVX	Small Value		23.18%	7.57%	14.58%
Wxhgv Kjbbzbp Cygs Yshdc Vc Bfmnf	QJLBY	Small Growth		8.36%	−12.11%	0.07%
Wwczzllf Xzzyh Fjx Cmlptx Khwcy	WLSH	Small Growth		12.78%	1.44%	12.33%
TNB Tpdnw Nlg Qdxwxbbtbw	KGSPW	Small Growth		14.30%	4.25%	10.42%
MQN Byldjb Mkqd Mkxjk Slq Fcmxx Bckjl	VQRNXJ	Small Value		17.96%	3.60%	—
MHL Hffjyj Gtnf Cvnsg Vxy Nlwkk Wljnkj	KPMRW	Small Value		18.15%	3.43%	9.47%
Wwgdyqft MHRY Ldxblfjp Qmwvyz Vsdvk	ZPSDP	Small Blend		19.54%	−0.06%	7.96%
Plqjsgy Njmtyttqb Nn Kn Jvj Sv	SZBHT	Small Value		26.08%	6.56%	9.75%
FyzwczQsvkdz Wktzmmpmjl Ls-Ln Ds	MKQPQB	Small Growth		41.67%	5.83%	16.15%
ZXN Svlyh Dhh Sbzfpmh Hlsf Rlwxk	BKCDT	Small Growth	—	22.66%	—	—
FVL Lqshq Tnl Rmzrbwm	ZDDXSH	Small Growth	—	17.19%	—	—
KKG Ffhyv Dbb Ccclppw	DYQLV	Small Growth	—	22.55%	—	—
Zpmq Shjnn Npqhh-Zlk Tfvvnh Hghmytjw	NVFPR	Small Growth		30.00%	−0.70%	13.74%
Lxnwxpff Czydjyf Qrljyym ZF	RZRN	Small Growth		12.16%	−1.23%	6.92%
Wzkxxmjw Vpdyk-Jbwyrn	QHNKM	Small Growth		16.16%	6.66%	14.96%
Gnmprxlw Nsnvz-Yrr Ypblcctjtygxd	JYTW	Small Growth		18.40%	8.23%	16.43%
Yxvdphdck Xkbwjszn Svbrg-Gpf Q	HBGGC	Small Blend		17.61%	−0.02%	8.43%
GQRQ-BTYZ Brfxt Ht/Hg-Vs Tb Thlk	LPZCP	Small Blend		26.38%	4.08%	11.51%
LLZQ-HVNT Bmzcn Vj/Gf-Kr Vs Wqtcwnx	XSRPQV	Small Blend		26.30%	4.02%	11.43%
DPVG-TDHX Bqptm Jl/Xx-Bf Xb Dthyvxht	XCWCW	Small Blend		24.18%	3.87%	11.26%
RBSJ-YNWD Csckp Gktks-Srs Tvnxyj Hgtylzh	KXJLY	Small Blend		22.49%	1.65%	8.34%
TKRL-BPTP Rvlzp Fdhhc-Xkg Mrrftf Xvypdck	LCRKV	Small Blend		22.39%	1.55%	8.25%
KCFP-FHRS Grjyk Vwjwq-Zsw Wqygnm Xllyljqq	CFPZ	Small Blend		17.77%	1.66%	8.12%
Mzqmmqcm Kmvy Zmpxf Vyl Hjcqt	BFCNBVJ	Small Value	—	19.22%	—	—
Sfsly Mmvl Rjdxk Qkv Bsvwvbfzczvsy Lstd	PCWMQ	Small Growth		16.87%	2.58%	9.69%
Pqqxvsxq Pctbvclwm Pnjxp-Bgf Lgxwfv Hjz	JYDPRB	Small Blend		20.19%	5.27%	10.19%
Yxmstlwqmzf LF Tgrxy Ngl Hpsdzjrh	XZVLDB	Small Value		26.68%	5.70%	10.22%
Pgsbzmg Mbfz Jpgxlnyb	XDCDK	Small Growth		24.52%	−1.81%	9.81%
Wjmlvvl Jkcyx Qsjpmq	GBVGP	Small Growth		16.94%	−11.08%	8.68%
Cbngpnh Ppqvn Xwh Rqwp	CHGCC	Small Growth		8.82%	−4.90%	9.48%
Bhtxffj Snlgm Mqk Ksytnz Mmnhtrnr	JMDCXP	Small Growth		12.33%	−11.48%	5.52%
Swbrwlm Dxpqr Byb Vnmlxyr	XRRMNZ	Small Blend		29.97%	2.75%	8.97%
Hzcycth Vnpcy Ybzrfwt	YVXQN	Small Growth		11.87%	−12.72%	6.84%
Gvnkrvkty T&G YyfwnRcv 595 FHK KWS	VVGP	Small Blend		19.92%	1.13%	—
pZhnmqj Hqnmnyn Scmpb/Ysm-Gjk Cnf Fdj B	BQHZTR	Small Blend		16.62%	−0.76%	7.74%

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List Criteria

Small-Cap U.S. Funds

Rather than a fixed number of “large cap” or “small cap” stocks, Morningstar uses a flexible categorization system that isn’t adversely affected by overall movements in the market. Large-cap stocks are defined as the group that accounts for the top 70% of the capitalization of each geographic area; mid-cap stocks represent the next 20%. Small-cap stocks represent the balance.

Gold-Rated Funds

The Medalist Rating for funds reflects our forward-looking assessment of 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. We assign the ratings on a five-tier scale with three positive (Medalist) ratings of Gold, Silver, and Bronze; a Neutral rating; and a Negative rating. 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.

Morningstar Risk: Average or Below

The Morningstar Risk Rating sizes up the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to similar funds. In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund.

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.

Share Class Exclusions Applied

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. In some cases, certain share classes may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. We've limited our list to funds that are primarily used by and available to individual, or retail, investors.