6 Top-Performing Small Blend Funds

Small blend funds can offer opportunities for investors willing to stomach higher volatility. These are the best names in the category, according to Morningstar analysts. We looked for the funds with the best returns over the last one-, three-, and five-year periods. Six made it through the screen:

• Federated Hermes MDT Small Cap Core Fund QLSCX
• Fidelity Advisor Small Cap Fund FZAOX
• Invesco RAFI US 1500 Small-Mid ETF PRFZ
• Nuveen Small-Cap Value Opportunities Fund NSCFX
• Royce Small-Cap Fund RPMIX
• T. Rowe Price Integrated US Small-Mid Cap Core Equity Fund TQSIX

Over the last 12 months, the small-blend category returned 12.42%. On an annualized rate, these funds have returned 11.90% over the last three years and 7.69% over the last five. That compares with the Morningstar US Market Index, which has returned 16.79% over the last 12 months, 22.51% per year over the last three years, and 13.26% per year over the last five years.

Screening for the Top-Performing Small-Blend Funds

Small-blend portfolios favor US firms at the smaller end of the market-capitalization range. Some aim to own an array of value and growth stocks while others employ a discipline that leads to holdings with valuations and growth rates close to the small-cap averages. Stocks in the bottom 10% of the capitalization of the US equity market are defined as small-cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate.

To find the best small-blend funds, we looked at returns data from the past one, three, and five years using Morningstar Direct. We screened for open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We excluded funds with assets under $100 million and analyst coverage that was not 100%. This left six investments.

Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors outside of retirement plans, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. In addition, Medalist Ratings may differ among the share classes of a fund.

Federated Hermes MDT Small Cap Core Fund

• Morningstar Medalist Rating: Bronze
• Morningstar Rating: ★★★★

The $1.7 billion fund has climbed 18.57% over the past year, outperforming the average fund in its category, which rose 12.42%. The Federated Hermes fund, launched in June 2016, has climbed 15.68% over the past three years and 9.23% over the past five.

This strategy’s quant process aims to tap diverse alpha sources in a single approach. Its model assesses stocks on a multitude of combinations of 16 factors. The factors generally incorporate metrics of valuation, quality, and technicals, with examples such as earnings/price trend, earnings repeatability, and five-year return. The firm’s research suggests that while individual factors aren’t especially predictive on their own, they grow much more effective combined with other factors. A random forest model tests thousands of potential factor combinations based on 30-plus years of US stock data and adjusts to the market environment.

Results have been noticeably better since the model’s introduction in 2013, improving upon its less flexible initial design with different avenues to produce outperformance. For example, the process will pick more aggressive, fast-growing stocks that have strong momentum as well as more value-oriented ones with beaten-down prices and low momentum, and it will adjust allocations to different company types with changes in the market environment. The managers continually improve the models through updates twice a year.

Fidelity Advisor Small Cap Fund

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

The $2 billion fund has climbed 16.87% over the past year, outperforming the average fund in its category, which rose 12.42%. The Fidelity fund, launched in August 2013, has climbed 14.39% over the past three years and 9.74% over the past five.

The strategy benefits from the experience and skill of manager Jennifer Cardillo. She joined Fidelity out of college in 2009 and spent most of her time as an analyst on the small-cap team, covering healthcare and technology stocks. This strategy is her first charge, and she took over as its lead manager in June 2019. Since then, Cardillo has distinguished herself by successfully navigating it through varied markets. For instance, the strategy excelled in growth-driven markets (like 2019) and value-driven ones (like 2021). It also held up relatively well during 2020’s first-quarter selloff.

The strategy’s success stems from a solid approach. Cardillo divides the portfolio into three buckets: Steady growers account for 50%-70% of assets, while exceptional growers and opportunistic ideas (like turnarounds or management changes) make up the rest. The approach stands out for its quality orientation, which is reflected in the portfolio’s aggregate efficiency metrics like return on equity and return on invested capital that consistently trend well above those of the lower-quality Russell 2000 Index. Conversely, the portfolio’s slight bias toward cyclical sectors, like materials and consumer discretionary, keeps it from lagging too much in rallies, which can be a headwind for quality-oriented small-cap managers.

Invesco RAFI US 1500 Small-Mid ETF

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★

Over the past year, the Invesco fund rose 16.40%, while the average fund in its category rose 12.42%. The fund, which launched in September 2006, has climbed 14.50% over the past three years and 10.00% over the past five.

Nuveen Small-Cap Value Opportunities Fund

• Morningstar Medalist Rating: Bronze
• Morningstar Rating: ★★★★

The $280.8 million fund has climbed 15.60% over the past year, outperforming the average fund in its category, which rose 12.42%. The Nuveen fund, launched in February 2013, has climbed 15.85% over the past three years and 12.65% over the past five. A flexible approach with prudent risk management gives Nuveen Small-Cap Value Opportunities an edge—at the right price.

Comanagers Andy Hwang and Tom Lavia took over command of this strategy in 2019 when previous longtime manager Phyllis Thomas departed. They are off to a strong start, but some questions remain. The duo has considerable industry experience, including more than a decade at Nuveen affiliate NWQ, but neither has run a portfolio before. The managers primarily work with two dedicated analysts, but the small group has a sizable workload. The managers serve as analysts on Nuveen’s value equity team and also run sibling Nuveen Small/Mid Cap Value. Additionally, Lavia served as a comanager on a global sustainability strategy starting in 2022, but it struggled to keep up with its benchmark and gain assets, leading to its closure in October 2024.

Fortunately, the managers now have access to Nuveen’s central research team and resources following the NWQ/Nuveen integration at the end of 2021. They have leaned on a few members for help in certain industries as well as some of the risk-management tools, but it’s primarily the core group of four supporting this portfolio.

Hwang and Lavia apply the same approach their predecessor did, with one minor improvement. The duo looks for companies offering favorable risk/reward profiles and catalysts that can improve their situations. They look for attractively priced companies that preferably have competitive advantages, low debt, and management teams with strong incentive structures. The managers are willing to go where they can find mispriced stocks, whether deep value or growth at a reasonable price. Their approach is still cautious, however, with an emphasis on risk management and downside protection. For example, Hwang and Lavia have reeled in the large sector bets that were common during Thomas’ tenure.

Performance has gotten off to an impressive start since Hwang and Lavia took over in July 2019. From then through April 2025, the institutional shares’ 9.4% annualized return beat their prospectus benchmark Russell 2000 Value Index and the Russell 2000 Index by 3.8 and 3.9 percentage points, respectively. After a sluggish first two years, performance has excelled over the past four years. Their cautious approach shone in 2022’s down market, and the strategy has continued to thrive since then, thanks to strong stock-picking.

Royce Small-Cap Fund

• Morningstar Medalist Rating: Bronze
• Morningstar Rating: ★★★★★

The $1.9 billion fund has gained 15.16% over the past year, while the average fund in its category is up 12.42%. The Franklin Templeton fund, launched in June 2011, has climbed 14.14% over the past three years and 8.79% over the past five.

This fund changed its name and bid adieu to its namesake manager last year. Chuck Royce, who had run this fund since 1972, retired in September 2024—four months after the strategy changed its name from Royce Pennsylvania Mutual. After 52 years and gradually adding comanagers to run independent portfolio sleeves for almost 20 years, Royce’s retirement was no surprise. Seasoned managers remain, and Royce’s departure simplifies this fund’s approach.

Five managers who run other firm strategies remain on the job. That’s down from seven before October 2024. Besides Royce, James Stoeffel, who had run this strategy’s micro-cap portion since May 2017, also stepped down to focus on Royce Micro-Cap. Steven McBoyle, Lauren Romeo, and Andrew Palen of Royce Premier, Jay Kaplan of Royce Small-Cap Value, and Miles Lewis of Royce Small-Cap Total Return remain. It’s a solid mix of veteran and up-and-coming managers.

The fund’s approach and portfolio shouldn’t change much. In fact, streamlining its structure could help clarify it. As the fund’s sleeve managers assumed more of the portfolio over the years, Chuck Royce stayed involved by adding to any of his colleagues’ picks that he thought had the biggest discounts to estimated business value and/or the best odds of fundamental or price improvement. His familiarity with the fund’s holdings helped determine its top 100 holdings, but it had grown hard to determine how his overlay influenced the portfolio.

The portfolio’s characteristics shouldn’t change either. It will remain diversified over nearly 300 stocks that, on average, are more profitable and reasonably priced than those of Russell 2000 and Russell 2000 Value indexes. Most of the remaining managers use detailed, data-driven processes to find fewer than 65 stocks each for their sleeves. Despite discarding its dedicated micro-cap sleeve, the fund should still have a healthy appetite for them since each of the remaining managers considers them part of their opportunity set.

T. Rowe Price Integrated US Small-Mid Cap Core Equity Fund

• Morningstar Medalist Rating: Silver
• Morningstar Rating: ★★★★★

Over the past year, the T. Rowe Price fund rose 15.39%, while the average fund in its category rose 12.42%. The fund, launched in February 2016, has climbed 16.98% over the past three years and 11.64% over the past five.

Thanks to a capable management duo and a well-executed, structured investment process, T. Rowe Price Integrated U.S. Small/Mid-Cap Core Equity remains a top option in the mid-cap blend Morningstar Category.

This strategy blends quantitative and qualitative investment signals. Lead manager David Corris believes that combining human and quantitative stock ratings leads to better outcomes, as the inclusion of human ratings helps moderate some risks with quantitative investing. Typically, quant models are backward-looking, so there is a risk that they do not capture relevant forward-looking information that the market already ingested. By including T. Rowe Price’s analyst stock ratings model, the hope is that these potential blind spots get uncovered. Still, the quant model plays a major role, and ideally, Corris and comanager Prashant Jeyaganesh want to own stocks that are rated highly by both the quant model and T. Rowe’s well-regarded analyst team. In the small- and mid-cap universe, not every stock is covered by a human analyst, so stocks can often be selected solely on their quantitative merits.

The managers believe that quality comes first in small- and mid-cap investing, which is generally a winning recipe in the space. This portfolio typically has more exposure to higher-quality and lower-volatility stocks than its Russell 2500 prospectus benchmark according to Morningstar’s Risk Model, which should generally lead to good relative performance in downturns, though upside participation may be limited.

Jack Shannon, principal