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Mutual Fund Commentary

Investors looking to mop up handsome gains over a short run often invest in small cap funds. Though riskier in character than other fund categories, these funds have the ability to deliver appreciably higher returns due to two primary reasons. Firstly, they generate high volumes of sales in a booming market, leading to a rise in prices. In addition, research has shown that smaller firms reinvest their profits back into their business. This 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. To view the Zacks Rank and past performance of all small-cap funds, investors can click here to see the complete list of funds.

HighMark Small Cap Core Fiduciary seeks capital growth over the long term. The fund invests a large share of its assets in domestic small cap stocks which are undervalued and have good earnings potential. Not more than 20% of its assets may be used to purchase foreign securities. This small-cap mutual fund has a three year annualized return of 18.44%.

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

Needham Small Cap Growth (NESGX - MF report) invests the majority of its assets in domestic equity securities of companies traded on a domestic security exchanges. The fund focuses on acquiring stocks which are attractively priced relative to their underlying value. The small-cap mutual fund has a three year annualized return of 8.00%.

As of September 2012, this small-cap mutual fund held 43 issues, with 7.36% of its total assets invested in Emulex Corporation.

Frost Small Cap Equity A (FAHMX - MF report) seeks maximum total return. The fund invests a large share of its assets in small cap companies. It aims to purchase equity securities which are attractively priced relative to the underlying value of the firm. This small-cap mutual fund has a three year annualized return of 8.77%.

The small-cap mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.37% compared to a category average of 1.47%.

Cambiar Small Cap (CAMSX - MF report) invests heavily in small-cap companies. The market capitalization of these companies must be lower than $3.5 billion or within the range of the Russell 2000 Index, whichever is greater. The small-cap mutual fund has a three year annualized return of 15.70%.

Jeffrey H A. Susman is the fund manager and he has managed this small-cap mutual fund since 2012.

Nuveen Small Cap Growth Opportunities A (FRMPX - MF report) seeks capital appreciation. Common stocks of companies with market capitalizations under # billion constitute the majority of its investments. A maximum of 15% of its assets are invested in non-dollar denominated foreign securities. This small-cap mutual fund has a three year annualized return of 13.46%.

The small-cap mutual fund has a minimum initial investment of $3,000 and an expense ratio of 1.47% compared to a category average of 1.47%.

To view the Zacks Rank and past performance of all small-cap mutual funds, investors can click here to see the complete list of funds.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.

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