Small Funds, Big Returns

The benefits small funds offer are often overlooked. Defined as portfolios with relatively small asset bases, small funds have the ability to establish larger positions in smaller companies without affecting the market for their stocks.

Not only do small funds have a bigger universe of stocks from which to pick, especially important for small-cap funds, but the ability to buy enough of a position to go around the portfolio. Also, small funds can get in and out of a position much faster than very large ones, which, depending on the circumstances, can be a distinct advantage.

Standard and Poor’s screened its database to uncover domestic equity funds with under $200 million in assets ranked 4 or 5 Stars as of June 30, 2003. Out of the 1970 funds with a 4 or 5 star ranking, only 4% made the cut. One caveat: Though the outperformers have a high Star ranking, some also have higher-than-average expenses that can result from poorer economies of scale.

Here is a list of the top three small funds in each investment style. Though no large- and mid-cap growth funds made it into the screen, all of the funds below are ranked 5 Stars by Standard & Poor’s and have delivered solid returns.

Three-Year Star Ranking**Three-Year Annualized Return (%)Expense Ratio (%)

Large-Cap Blend-11.51.3

AmSouth Mutual Fds Select Equity/Instl (ASEPX) 5+9.51.3

Pioneer Core Equity Fund/A (PATMX) 5+8.21.8

Large-Cap Value-2.01.4

Vontobel US Value Fund (VUSVX) 5+14.81.7

Nuveen NWQ Multi-Cap Value Fund/R (NQVRX) 5+11.91.3

Hotchkis & Wiley Large Cap Value Fund/I (HWLIX) 5+11.31.0

Mid-Cap Blend-0.71.3

Yacktman Focused Fund (YAFFX) 5+22.01.3

Eagle Growth Shares (EGRWX) 5+8.63.2

ABN AMRO Mid Cap Fund/N (CHTTX) 5+7.21.3

Mid-Cap Value+6.21.4

J Hancock Classic Value/A (PZFVX) 5+16.61.4