Large-cap stocks have dominated in recent years, leaving the average mid-cap blend fund trailing the broader market. However, a few mid-cap blend funds have kept up, including the Vanguard US Momentum Factor ETF VFMO.
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 of mid-cap blend funds, offerings from Vanguard stood out, taking up two of the four slots.
- T. Rowe Price Integrated US Small-Mid Cap Core Equity Fund TQSIX
- Vanguard Strategic Equity Fund VSEQX
- Vanguard US Momentum Factor ETF VFMO
- WisdomTree US Multifactor Fund USMF
Mid-Cap Blend Funds Performance
Over the last 12 months, mid-cap blend funds have returned 10.78%. On an annualized rate, mid-cap blend funds have returned 7.72% over the last three years and gained 10.35% over the last five years. That compares with the Morningstar US Market Index, which has returned 18.65% over the last 12 months, gained 12.78% per year over the last three years, and gained 14.27% per year over the last five years.
What Are Mid-Cap Blend Funds?
The typical mid-cap blend portfolio invests in US stocks of various sizes and styles, giving it a middle-of-the-road profile. Most shy away from high-priced growth stocks, but aren’t so price-conscious that they land in value territory. The US mid-cap range for market capitalization typically falls between $1 billion-$8 billion and represents 20% of the total capitalization of the US equity market. The blend style is assigned to portfolios where neither growth nor value characteristics predominate.
Screening for the Top-Performing Mid-Cap Blend Funds
To find the best mid-cap blend funds, we looked at returns data from the past one, three, and five years, using data available in 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 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 four names.
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.
T. Rowe Price Integrated US Small-Mid Cap Core Equity Fund
- Share Class: T. Rowe Price Integrated US SMCC Eq I TQSIX
- Morningstar Medalist Rating: Silver
- Morningstar Rating: ★★★★
Over the past 12 months, this $812.3 million fund has gained 12.57%, while the average fund in its category is up 10.78%. The fund, launched in February 2016, has climbed 10.90% over the past three years and 11.41% over the past five.
“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.”
—Jack Shannon, principal
Vanguard Strategic Equity Fund
- Share Class: Vanguard Strategic Equity Inv VSEQX
- Morningstar Medalist Rating: Gold
- Morningstar Rating: ★★★★
Over the past 12 months, the $9.5 billion Vanguard Strategic Equity Fund rose 13.83%, while the average fund in its category rose 10.78%. The Vanguard fund, launched in August 1995, has climbed 9.96% over the past three years and 12.56% over the past five.
“Portfolio manager Cesar Orosco took the helm here in February 2021 and patiently but firmly reshaped the approach here to pursue its historical philosophy. He heads the seven-member active equity team that runs this strategy and others; they sit within Vanguard’s Quantitative Equity Group. Orosco arrived at Vanguard after 10 years as a quant at AJO. Orosco partnered with other Vanguard teams, got the firm’s full buy-in on using artificial intelligence, and tweaked his team’s workloads to emphasize their interests and skills.”
—Todd Trubey, senior analyst
Vanguard US Momentum Factor ETF
Over the past 12 months, this $1 billion fund has gained 15.79%, while the average fund in its category is up 10.78%. The fund, launched in February 2018, has climbed 12.85% over the past three years and 14.50% over the past five.
“The consistency of this fund’s momentum tilt stands out. Momentum can shift on a dime and require significant portfolio turnover to stay on top of it. Vanguard’s Quantitative Equity Group constantly monitors this fund, trading whenever its momentum exposure slips. That gives it an advantage over rigid index funds that can only turn over at benchmark rebalances. Constant turnover invites trading costs that weigh on total returns, but liquid underlying holdings and Vanguard’s trading infrastructure keep those expenses in check.”
—Ryan Jackson, senior analyst
WisdomTree US Multifactor Fund
Over the past 12 months, the $372.5 million WisdomTree US Multifactor Fund rose 15.30%, while the average fund in its category rose 10.78%. The WisdomTree fund, launched in June 2017, has climbed 10.76% over the past three years and 11.25% over the past five.
“This index strategy features stocks with the best exposure to a quartet of risk factors–value, quality, momentum, and correlation–that should enhance returns and rein in volatility. It favors stocks with balanced multifactor exposure to those that excel in one area but lack in others, precipitating pronounced portfolio-level factor tilts. Value, quality, and momentum’s proven track record of market-beating performance makes them attractive pursuits. Moreover, some factors this fund channels tend to pay off at different times, like value and quality. By spreading its factor bets, this fund positions itself to remain competitive no matter what factor is in vogue.”
—Ryan Jackson
This article was generated with the help of automation and reviewed by Morningstar editors.
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