Top 5 Best Performing Small Cap Mutual Funds

When substantial profits in the short run are uppermost on the mind of investors they often turn to small cap funds. This class of funds carries far greater risk than other categories but also have the ability to deliver appreciably higher returns due to two principal reasons. Firstly, small cap equity securities generate high sales volumes in a rising market, leading to a spike in their prices. Further, research has shown that smaller firms reinvest their profits back into their business. This often reassures shareholders of better performance over the long term.

Below we will share with you 5 top rated small-cap mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Mutual Fund Zacks Rank Total Return YTD
Southernsun Small Cap Investor #1 Strong Buy 19.5%
Waddell & Reed Small Cap A #1 Strong Buy 19.0%
Alliance Bernstein Small Cap Growth #1 Strong Buy 16.4%
Driehaus International Small Cap #1 Strong Buy 15.3%
HighMark Small Cap Advantage #1 Strong Buy 15.0%

SouthernSun Small Cap Investor (SSSFX) seeks capital growth over the long term. The majority of the fund’s assets are invested in small-cap companies. It focuses on acquiring equity securities of companies which are included in the Russell 2000 index for the past year. The small-cap mutual fund has a five year annualized return of 4.13%.

The small-cap mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.50% compared to a category average of 1.48%.

Waddell & Reed Small Cap A (UNSAX) invests at least 80% of its assets in domestic and foreign small-cap companies. The fund focuses on acquiring common stocks of companies which are new entrants, particularly those which are entering sectors with the opportunity for appreciable growth. The small-cap mutual fund has a ten year annualized return of 4.46%.

The fund manager is Gilbert Scott and he has managed this small-cap mutual fund since 2003.

AllianceBernstein Small Cap Growth A (QUASX) seeks capital appreciation. The fund invests heavily in equity securities of small-cap companies with market capitalizations of less than $10 million. The small-cap mutual fund has a five year annualized return of 3.38%.

As of August 2010, this small-cap mutual fund held 105 issues, with 1.64% of its total assets invested in TIBCO Software, Inc.

Driehaus International Small Cap Growth (DRIOX) invests heavily in foreign small-cap companies with significant growth potential. The fund focuses on acquiring equity securities of companies whose location and market cap correspond to firms which are part of the MSCI All Country World ex USA Small Cap Growth Index. The small-cap mutual fund returned 27.27% over the last one year period.

The small-cap mutual fund has an expense ratio of 1.85% compared to a category average of 1.63%.

HighMark Small Cap Advantage (HSAFX) seeks long term capital growth. The majority of the fund’s assets are invested in small-cap companies with strong growth characteristics. Not more than 20% of its assets are utilized to purchase foreign securities. The small-cap mutual fund returned 21.46% over the last one year period.

David Goerz is the fund manager has managed this small-cap mutual fund since 2007.

To view the Zacks Rank and past performance of all small-cap mutual funds, then click here.

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