Investors with a high-risk appetite and an interest in growth and value investing may choose small-cap blend mutual funds to boost their portfolio. While blend funds, also known as "hybrid funds," aim for value appreciation through capital gains, small-cap funds have better growth prospects than their large and medium counterparts. Blend funds provide significant exposure to growth and value stocks, and owe their origin to a graphical representation of a fund's equity style box.
Funds investing the majority of their assets in securities of companies with a market capitalization below $2 billion are generally considered small-cap mutual funds. Although funds investing in small-cap stocks are believed to have more exposure to market volatility than large or medium ones, they are expected to provide diversification across sectors and companies. Moreover, small-cap companies are believed to be less affected by a global downturn, thanks to less international exposure.
Below, we share with you three top-ranked small-cap blend mutual funds, namely Keeley Small Cap Fund (WESCX), Franklin U.S. Small Cap Equity Fund (LGSCX) and Vanguard Strategic Small-Cap Equity Inv (VSTCX). Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Keeley Small Cap Fund seeks to provide long-term capital appreciation by investing primarily in smaller-capitalization equity securities. Under normal market conditions, the fund invests at least 80% of its net assets in a portfolio of common stocks of smaller companies.
Keeley Small Cap Fund has a three-year annualized return of 18.3%. As of December 2025, WESCX held 79 issues, with 3.4% of its assets invested in NetScout Systems, Inc.
Franklin U.S. Small Cap Equity Fund invests most of its assets in small-cap U.S. equities. LGSCX advisors also invest in securities of foreign companies such as American Depositary Receipts.
Franklin U.S. Small Cap Equity Fund has three-year annualized returns of 16.1%. Christopher W. Floyd has been one of the fund managers of LGSCX since May 2021.
Vanguard Strategic Small-Cap Equity Inv fund invests most of its net assets in domestic equity securities of small-capitalization companies.
Vanguard Strategic Small-Cap Equity Inv fund has three-year annualized returns of 17%. VSTCX has an expense ratio of 0.23%.
To view the Zacks Rank and the past performance of all small-cap blend mutual funds, investors can click here to see the complete list of small-cap blend mutual funds.
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This article originally published on Zacks Investment Research (zacks.com).
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