3 Top-Notch--and Still Open--Small Growth Funds
These Morningstar Medalists from Vanguard, T. Rowe Price, and Wasatch are still accepting dollars from new investors.
Susan Dziubinski: Hi, I'm Susan Dziubinski from Morningstar.com. Funds in the small-cap growth category are among the best performers this year. Perhaps, not surprisingly, the category has enjoyed decent net inflows this year, too. In an effort to preserve their focus, small-cap funds sometimes close to new investors. Here are a trio of Morningstar Medalists in the small-growth category that are still open.
Alex Bryan: Vanguard Small Cap Growth Index is one of the cheapest and best diversified funds in the Morningstar small growth category. This fund basically owns the faster growing half of the U.S. small-cap market and that brings in more than 600 stocks. Like a lot of its peers, it tends to favor the technology and healthcare sectors, but it effectively keeps risk in check through it's broad diversification, and its low expense ratio gives it a durable edge against its competitors. It charges a low expense ratio of 7 basis points, and that's helped it beat the category average by about 85 basis points annually over the past 10 years. Broad diversification and a low fee should continue to give this fund an edge going forward.
Linda Abu Mushrefova: Gold-rated T. Rowe Price QM US Small Cap Growth Equity is a fund we have high conviction in. Lead manager Sudhir Nanda has been the lead on this strategy since October 2006 and has been a member of T. Rowe's quantitative equity team since 2000. He's further supported by a team of nine quantitative equity analysts and a five-person dedicated IT team. Together, they run the model that ranks stocks in the MSCI small-cap growth index based on three broad buckets: evaluation, earnings quality, and momentum. The first two buckets have the largest weight, while momentum accounts for the smallest portion. This results in a portfolio of about 300 names. Their disciplined approach has rewarded investors over time, placing the fund at the top of the small-cap growth Morningstar category consistently. Finally, the fund is still open to new investors. Low fees are an added bonus, and this is an excellent option for investors seeking small-cap growth exposure.
Shannon Yan: Gold-rated Wasatch Core Growth is a great option in the small-cap space. It's in the capable hands of lead manager J.B. Taylor, who's been leading the fund for 17 years. Like many people at this very tight-knit team, Taylor has built his entire career at Wasatch. The team has a very unique culture where it's very collaborative; for example, more than one person looks at every investment idea. Together, they build a compact portfolio of stocks with durable economic advantages and consistent earnings growth across market cycle. That gives the funds a very attractive risk-return profile. They tend to lose less in down markets relative to the Russell 2000 index, the Russell 2000 Growth index, and also the typical small-cap peer. Fees are average, but Taylor and the team are more than capable of overcoming that hurdle. Wasatch also has a great track record of closing funds before they grow too big, which bodes well for this fund's future.
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