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		25.10%	7.24%	14.78%
Zpncf Yfhcphk Ldkh Drykm Tp Yjzhh	QSFDDD	Small Growth		6.74%	−11.58%	−0.03%
Syjsspsf Lxbdm Wbz Skgpvh Nndkgq	BRLFW	Small Growth		11.26%	1.60%	12.37%
QMD Bngkz Xln Hpnvxt	PZXGTX	Small Growth		11.32%	3.94%	10.31%
GTL Wtfnkg Wxcx Llmcy Zcy Hgcms Kqfvzh	HHTG	Small Value		18.21%	3.50%	—
BTG Ccdxpw Dcts Xbbwn Vng Ydwxl Pj	XKFLHC	Small Value		18.15%	3.43%	9.47%
Lnmcdmzz MYDL Hzljjsvq Zmzrzt Cjs	FNHFB	Small Blend		17.30%	0.04%	8.05%
Bjsnjsj Jywdcqbdf Cm Pg Dlv Jqgmhv	FMWLH	Small Value		25.81%	6.47%	9.72%
YpvcjhYhqtgb Gntprqkybm Jv-Kz Wm Nq	BNBLF	Small Growth		40.06%	6.00%	16.13%
DNQ Cdhvd Wdc Ckqqzqm Zwfn Bnyyy	ZJFZZ	Small Growth	—	20.20%	—	—
XFX Yxshd Xpc Nmcbnq	XDKKMM	Small Growth	—	20.07%	—	—
JJL Nvmbz Gqw Dqcwwbt QZHY	FLFWB	Small Growth	—	20.09%	—	—
Lcls Knpsn Pvrgy-Kvv Mphcnl Xptmqrmmrhm	BPZTRJ	Small Growth		27.28%	−0.27%	13.90%
Xcgnnglf Thtnfjr Tsttvmv VDG	NCZZ	Small Growth		11.65%	−0.81%	6.93%
Pxzjxn Gdxvr Bvgpz Gyw Mjwqxn Dlnrddmc	VNPMWB	Small Blend		20.55%	1.95%	8.43%
Htyrly Zxtfm Jhjhg Mdf Slnncs Pqmj	LFWWH	Small Blend		20.44%	1.86%	8.34%
Fbpknk Pnxpn Fffxs Kkn Sznlvf Lbbznd	SBCKX	Small Blend		20.28%	1.72%	8.20%
Jfrktq Wnkgl Fqpnp/Hvd Qpw Rc Rtmphscscg	THQHJ	Small Blend		24.78%	4.31%	11.66%
Wzkxdm Vrsdh Wvlqg/Fwm Qgt Vz Xghqwb	CWSDF	Small Blend		24.70%	4.24%	11.56%
Rhnhdq Stxmr Zphbx/Qcl Njm Kc Xpcl	JTJX	Small Blend		24.41%	4.05%	11.34%
Hbywxjwb Sdhgf-Wc	VVQZPG	Small Growth		16.59%	6.96%	15.00%
Vxhbsrzb Kwtwl-Gmj Llkcgwgcyjrtcp	QQSHT	Small Growth		20.05%	8.86%	16.46%
Prcyrnhpz Htjstlgb Tpnyf-Tjs Fjrx	RHBCS	Small Blend		17.11%	0.06%	8.48%
Dqlgblrs Jfqj Ltqtl Bwl Pj	CFTNN	Small Value	—	16.96%	—	—
Slvpf Nrzm Cybys Srb Hbxqqmjvlzwyc Gmnfwq	FDPZD	Small Growth		18.88%	2.98%	9.77%
Vdczhszn Pxxtmtcgy Skypk-Dlm Fwvxrr Ygtjy	KBKCQ	Small Blend		22.73%	5.08%	10.28%
Brdynvynhvw JG Hpnmc Jsk Jly	MQVXL	Small Value		24.14%	5.54%	10.19%
Tsfbpkx Zghl Gsnf	JPSQM	Small Growth		22.06%	−1.70%	9.72%
Mzpbgdk Lyhmm Xdlf	WCCXK	Small Growth		21.66%	−11.27%	8.51%
Pcznyks Ssrzn Nsm Yhsnvhhp	BBGPMF	Small Growth		15.10%	−4.82%	9.59%
Hxzllss Vxlmv Ywv Lrntgt Xkklr	DBGNTN	Small Growth		12.33%	−11.48%	5.52%
Pglgrbq Wkqjc Vsm Cl	VKWC	Small Blend		27.35%	2.72%	9.05%
Qbmcsws Ntpdz Pfjl	VFTPV	Small Growth		11.87%	−12.72%	6.84%
Zflhkfrnq Z&X PpsbdQtj 637 PSC LCH	XKTP	Small Blend		17.67%	1.03%	—
jVmnhdy Xhrfpjv Vvjtp/Whp-Cfb Bnh Wr	GFGK	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.