5 U.S. Small-Cap Funds to Consider
Small caps have been falling behind this year: As of mid-November, the Russell 2000 is up 1.21% for 2014, while the S&P 500 is up 10.30%.
Despite the sector's underperformance this year, however, your clients may still want to consider U.S. small-cap funds over the long term. Historically, small caps tend to outperform large caps over five-year periods.
Indeed, in the last five years, the Russell has returned 102.21% while the S&P has returned 86.79%.
While some analysts now say small caps have outperformed and will endure a prolonged pullback, current market conditions give such funds unusually good opportunities, argues Richard Shuster, senior portfolio manager for New York-based WPG Partners. "I think we've seen a lot of bifurcation in the stock market," he says. "These bifurcations get magnified in small and micro-cap stocks."
Bear in mind, however, that while some actively managed small-cap funds may outperform the Russell, many underperform -- and charge a management fee far higher than a low-cost ETF.
Here are the five top-performing U.S. small cap funds as of Nov. 11, by five-year performance, according to Morningstar. Click through to see the list, or view a one-page version here.