6 Top-Performing Small-Value Funds

While small-cap value stocks can outperform the broader market over time, they tend to be volatile and carry a meaningful risk of value traps, where low valuations reflect fundamental problems. A well-managed fund can help offset these drawbacks, providing investors a diversified portfolio of stocks.

For investors looking for exposure to this segment of the market, these six funds are the best options according to Morningstar analysts. All six are actively managed, though some, such as the entries from Dimensional Fund Advisors and Avantis, use a rules-based approach rather than specifically picking stocks.

To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. Among the ranks, offerings from Dimensional stood out, taking up two of the spots.

1. Avantis US Small Cap Value ETF AVUV
2. DFA US Small Cap Value Portfolio DFSVX
3. DFA US Targeted Value Portfolio DFFVX
4. Diamond Hill Small Cap Fund DHSYX
5. FPA Queens Road Small Cap Value Fund QRSIX
6. Invesco Small Cap Value Fund SMVSX

Screening for the Top-Performing Small-Value Funds

Small-value portfolios invest in small US companies with valuations and growth rates below other small-cap peers. Stocks in the bottom 10% of the capitalization of the US equity market are defined as small-cap. Value is defined based on low valuations (low price ratios and high dividend yields) and slow growth (low growth rates for earnings, sales, book value, and cash flow).

Over the past 12 months, the average fund in the small value category returned 11.74%. On an annualized basis, small-value funds have climbed 8.76% over the past three years and gained 9.80% over the past five years. Meanwhile, the Morningstar US Market Index has risen 16.12% over the past 12 months, 19.63% per year over the past three years, and 13.16% per year over the past five years.

To find the best small-value funds, we looked at returns data from the past one, three, and five years using Morningstar Direct. We screened for open-end and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with a Morningstar Medalist Rating of Bronze, Silver, or Gold. 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. Medalist Ratings may differ among the share classes of a fund.

Avantis US Small Cap Value ETF

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

The $22.5 billion fund has gained 14.54% over the past 12 months, while the average fund in its category is up 11.74%. The American Century fund, launched in September 2019, has climbed 11.56% over the past three years and 14.24% over the past five.

Avantis US Small Cap Value should continue to thrive because it diversifies well and balances its exposure to the quality and value risk factors. This fund hunts the small-cap universe for stocks that are cheap and profitable, an attractive duo of factors. Both have historically been tied to market-beating returns, and they tend to excel at different times, with the positive effect amplified in the small-cap market. Balancing the two should keep the fund competitive in most market environments.

The strategy has performed well despite higher volatility. It beat the Russell 2000 Value Index by almost 5.9 percentage points annualized from its September 2019 inception through May 2025. Emphasizing cyclical sectors contributes to moderately higher volatility than the benchmark, but it wasn’t enough to cut into its risk-adjusted return advantage. Sector bets won’t always pay off, but its relatively low fee should be a persistent advantage.

DFA US Small Cap Value Portfolio

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

The $17.7 billion fund has climbed 14.09% over the past 12 months, outperforming the average fund in its category, which rose 11.74%. The Dimensional fund, launched in March 1993, has climbed 11.12% over the past three years and 13.51% over the past five.

DFA US Small-Cap Value Portfolio offers a compelling option with its broad, well-diversified portfolio and cost-effective execution.

This strategy targets the smallest stocks in the US market: those that land in the bottom 10% by market cap. From that universe, DFA’s portfolio managers focus on the cheapest third by price/book ratio. They further refine holdings by avoiding names with poor profitability and aggressive asset growth. Stocks with these characteristics have historically been associated with poor expected performance. The strategy weights stocks by market cap, which curbs turnover and the associated trading costs.

DFA’s traders build on that cost-effective approach. They select trades from an eligible pool provided by the fund’s portfolio managers. Traders can substitute a given stock for another with similar size and value characteristics, and they can trade patiently to further cut back on transaction costs and taxes.

The portfolio lands among the broadest and most diversified in the small-value Morningstar Category. It holds more than 1,000 stocks, while its 10 largest positions represent about 7% of its assets. The fund’s price/book ratio has consistently been lower than that of the Russell 2000 Value Index. But avoiding stocks with poor profitability tilts the portfolio toward more-profitable names, on average.

Compared with the Russell 2000 Value Index, the portfolio has stronger exposure to cheaper stocks, which tends to drive its index-relative performance. It trailed the index by 3.1 percentage points per year between October 2014 and March 2020, when stocks trading at lower valuations performed poorly. However, it beat the index by 11.1 percentage points annualized between December 2020 and March 2023, when those stocks surged back to life. The exchange-traded fund has followed a similar path over its short life. The expense ratios for the mutual fund and ETF land in the cheapest quintile of the small-value category.

DFA US Targeted Value Portfolio

• Morningstar Medalist Rating: Gold
• Morningstar Rating: ★★★★

Over the past 12 months, the Dimensional fund rose 14.47%, while the average fund in its category rose 11.74%. The fund, launched in February 2000, has climbed 11.14% over the past three years and 13.50% over the past five.

DFA US Targeted Value Portfolio’s breadth, cost-effective execution, and competitive fee should give it a long-term advantage over its small-value category peers.

This strategy focuses on stocks from the cheaper half of the US mid- and small-cap markets in a cost-effective way. It avoids holding companies with poor profitability, which should steer the portfolio away from the riskiest names in its selection universe, and it weights constituents by their market cap. This low-turnover approach captures the market’s collective opinion of each stock’s value while cutting back on trading costs.

Dimensional’s traders build on that cost-effective approach. They select trades from an eligible pool provided by the fund’s portfolio managers. Traders can substitute a given stock for another with similar size and value characteristics, and they can trade patiently to further curb transaction costs.

Dimensional offers this strategy through a mutual fund and an exchange-traded fund. Both follow the same underlying strategy, but they may have small differences in their average characteristics owing to differences in trading and execution. They should provide a similar risk/reward profile long-term.

The fund’s intentional risk factor tilts have provided a long-term benefit. The mutual fund beat the small-value category average by almost 2 percentage points annualized over the 10 years through December 2025. Keeping a lid on trading costs contributed to its outperformance.

Diamond Hill Small Cap Fund

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

The $236.1 million fund has gained 18.66% over the past 12 months, while the average fund in its category is up 11.74%. The Diamond Hill fund, launched in December 2011, has climbed 13.69% over the past three years and 13.37% over the past five.

Diamond Hill’s solid management and approach make it a sound choice. Aaron Monroe has settled in as the strategy’s lead manager. He has been coming up with buy, sell, and portfolio adjustment ideas as a listed manager since February 2017, first with former marquee manager Tom Schindler, then with Diamond Hill Small-Mid Cap manager Chris Welch from February 2019 to March 2023, when he officially took over as lead here. Monroe, who was an analyst at the firm for 10 years before becoming a manager, is steeped in the firm’s intrinsic value approach.

Monroe has put his stamp on the strategy without departing from the house philosophy. Schindler tended to hold a lot of cash and mid-cap stocks, and sometimes bonds. Monroe, first with Welch and now on his own, doesn’t hold much cash and has moved much farther down the market-cap ladder. At the end of May 2025, the fund had 67% assets in micro-caps, more than the Russell 2000 Value Index’s 62% stake and nearly 80% of its small-value Morningstar Category rivals. The fund has a big micro-cap stake, up from a little more than half the portfolio’s assets a year earlier, partially because that is where Monroe has been finding opportunities and partly because he also runs a micro-cap limited partnership for the firm with two Diamond Hill analysts.

A micro-cap stake that big can add risk, but it has been a source of success for the fund in recent years. Cat litter maker Oil-Dri, which has helped this fund’s performance since appearing in the portfolio in November 2022, began as a holding in the partnership, Monroe said. Morningstar attribution shows that some of the fund’s best picks have been among its smallest-cap holdings.

The fund uses the same process regardless of the market cap. Like other Diamond Hill managers, Monroe relies on fundamental analysis to find stocks with share prices under their estimated intrinsic values. He likes companies with skilled leaders, durable competitive advantages, and stable cash flows, but will buy cyclical companies with depressed quality measures, such as returns on assets and returns on equity, if their share discounts are appealing.

FPA Queens Road Small Cap Value Fund

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

The $1.1 billion fund has gained 16.44% over the past 12 months, while the average fund in its category is up 11.74%. The FPA fund, launched in November 2020, has climbed 12.25% over the past three years and 11.25% over the past five.

For years, this strategy was a diamond in the rough. Manager Steve Scruggs of Bragg Financial Advisors, or BFA, in Charlotte, North Carolina, launched the mutual fund (then known as Queens Road Small Cap Value) in June 2002. He used a Warren Buffett-inspired approach that emphasized getting good small-cap stocks on the cheap, being patient, and being wary of the market’s gyrations. Scruggs was a one-man show who picked stocks well but often kept quite a bit of cash—often 10% or much more—in his portfolio. That cash position helped when stocks sold off, but a lot of it remained on the sidelines in ensuing rallies. By the late 2010s, Scruggs had compiled a decent record, but his fund’s assets remained meager.

With a few refinements, however, the strategy began to shine brighter. In 2020, BFA entered a distribution partnership with First Pacific Advisors. Many of FPA’s strategies have a defensive, value orientation like this strategy—so much so that in 2021, FPA agreed to merge a legacy fund, FPA Capital, into this offering. The move increased this fund’s scale and helped bring down its fees. FPA also launched institutional and advisor share classes alongside the original class (now the investor shares); the institutional class, in fact, holds more than 85% of the mutual fund’s USD 1 billion in total assets as of mid-August 2025.

Scruggs also added valuable help. In mid-2022, he hired Ben Mellman from IVA (a former value-investing firm) as a senior analyst. Mellman has enhanced the strategy’s screening techniques and has contributed perspective and research to what is now a small but efficient two-person team. Scruggs is only in his mid-50s and likely to be here for years to come, but Mellman is a plausible successor down the road.

Finally, Scruggs now keeps cash at or below 10% of assets in most cases. (It was 8.3% in June 2025.) This allows him to keep his conservative bent but gives the strategy more of a chance to keep up in rallies, especially the prolonged ones that otherwise don’t offer Scruggs the opportunities he likes.

Invesco Small Cap Value Fund

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

The $9.3 billion fund has gained 26.67% over the past 12 months, while the average fund in its category is up 11.74%. The Invesco fund, launched in February 2017, has climbed 22.74% over the past three years and 22.73% over the past five.

Invesco Small Cap Value’s talented lead manager and a robust approach make it a solid option.

Lead manager Jonathan Edwards has a long and successful history with this strategy. After joining the firm in 2001, he was promoted to comanager in 2010 before taking over as lead manager in 2018. Edwards plays an integral role, as he helps guide the team’s research efforts and is responsible for portfolio construction. Still, the strategy’s approach is collaborative. Edwards works with a small but stable four-person team that has been together for over six years. The group includes comanager Jonathan Mueller, who has comanaged the strategy since 2010, and three sector analysts. The team has a sizable workload as it also manages mid-cap strategy Invesco Value Opportunities, but its continuity is a strength, and it has delivered exceptional results on both strategies.

Edwards and his team effectively combine top-down and bottom-up research to build a differentiated portfolio. The team looks for companies overlooked by the market owing to perceived short-term concerns. A 30-variable qualitative scorecard—a tool Edwards and Mueller built in 2021—guides the team’s research, enabling it to monitor secular trends, industry controversies, and business cycle patterns. Edwards is willing to quickly shift the portfolio’s sector allocations based on where he sees opportunities. For example, as the Federal Reserve started lowering interest rates in mid-2024, Edwards aggressively added to regional banks, increasing the portfolio’s financials exposure to 18.5% in June 2025 from just 7.7% two years prior (which was a boost to performance). Timing sector cycles can be challenging, but the team’s disciplined valuation framework, as well as targeting companies with durable cash flows and expanding margins, helps reduce the risks of such bets. The team’s sell discipline is another strength; it team updates its valuation estimates regularly, helping it avoid behavioral traps like price anchoring.

Under Edwards’ guidance, this strategy has built an incredible record. Since he became lead manager in June 2018 through July 2025, the A share class’ 13.2% annualized gain easily outpaced its Russell 2000 Value Index prospectus benchmark and the Russell 2500 Value Index (another relevant bogy, given the strategy’s larger market-cap tilt) by 8.1 and 6.2 percentage points, respectively. Recent results have continued to impress, though it’s unlikely to outperform at this rate forever. The strategy also tends to be one of the most volatile in its small-value Morningstar Category. But over the long run, this fund should deliver.