We write a lot about the largest fund families: Vanguard, BlackRock/iShares, Fidelity, and Capital Group. And that’s for good reason. After all, these industry giants oversee dozens of low-cost, top-rated exchange-traded funds and mutual funds, many of which are popular investments with investors both inside and outside of their retirement plans.
But the big asset managers haven’t cornered the market on top-rated funds. Plenty of reasonably priced, highly rated mutual funds and ETFs can be found beyond the largest fund families.
Today, we’re looking at several mutual funds and ETFs run by smaller firms. All of the funds on the list invest in US stocks and earn Morningstar’s top Medalist Rating of Gold with 100% analyst coverage.
7 of the Best Funds You May Not Have Heard Of
- Brandes US Value ETF BUSA
- Nationwide GQG US Quality Equity Fund NWAYX
- Natixis Loomis Sayles Focused Growth ETF LSGR
- Neuberger Small-Mid Cap ETF NBSM
- Oakmark US Large Cap ETF OAKM
- Principal Focused Blue Chip ETF BCHP
- Primecap Odyssey Aggressive Growth Fund POAGX
All of the ETFs and mutual funds on this list earn Morningstar’s highest Medalist Rating, which means we think they’ll outperform over a full market cycle. They’re all also actively managed.
Here’s a bit about each of these top-rated funds.
Brandes US Value ETF BUSA
- Morningstar Category: Large Value
- Medalist Rating Process Pillar: Above Average
- Medalist Rating People Pillar: High
- Medalist Rating Parent Pillar: Above Average
- Expense Ratio: 0.60%
The long-tenured team members at Brandes US Value ETF are “value purists,” says Morningstar Director Jeffrey Schumacher. Patient and contrarian bottom-up investors, they only buy a stock when it trades at a meaningful discount to their collective estimate of intrinsic value, and the margin of safety influences the position size in the portfolio. This top-rated ETF holds 35-85 stocks.
Read Morningstar’s full report on Brandes US Value ETF.
Nationwide GQG US Quality Equity Fund NWAYX
- Morningstar Category: Large Blend
- Medalist Rating Process Pillar: High
- Medalist Rating People Pillar: High
- Medalist Rating Parent Pillar: Average
- Expense Ratio: 0.59%
“GQG Partners US Select Quality Equity’s unusual take on US stock investing is well worth a look,” says Morningstar Senior Analyst Gregg Wolper, who has been analyzing funds for three decades. Manager Rajiv Jain and his team take a quality growth approach, targeting reliably growing large companies with competitive advantages. Although Jain has held some stocks for years, he’s also known to quickly change direction. This highly rated fund is concentrated, holding only 30 or so names.
Read Morningstar’s full report on Nationwide GQG US Quality Equity Fund.
Natixis Loomis Sayles Focused Growth ETF LSGR
- Morningstar Category: Large Growth
- Medalist Rating Process Pillar: High
- Medalist Rating People Pillar: High
- Medalist Rating Parent Pillar: Average
- Expense Ratio: 0.59%
Manager Aziz Hamzaogullari and his team take a long-term, price-conscious approach to growth stock investing, focusing on cash-flow-rich companies with competitive advantages. Natixis Loomis Sayles Focused Growth ETF typically holds 20 to 25 stocks. Morningstar Associate Director Tony Thomas calls this relatively new but highly rated fund’s future “promising.”
Read Morningstar’s full report on Natixis Loomis Sayles Focused Growth ETF.
Neuberger Small-Mid Cap ETF NBSM
- Morningstar Category: Mid-Cap Growth
- Medalist Rating Process Pillar: Above Average
- Medalist Rating People Pillar: Above Average
- Medalist Rating Parent Pillar: Above Average
- Expense Ratio: 0.65%
Morningstar Senior Analyst Chris Tate argues that the wealth of experience at this newer ETF inspires confidence. The Neuberger Small-Mid Cap ETF team focuses on high-quality companies with low debt, high returns on assets, and competitive advantages whose stocks are trading at reasonable prices. They’ll build new positions slowly and will then hold for long periods. This top-rated ETF is concentrated in 45-60 stocks.
Read Morningstar’s full report on Neuberger Small-Mid Cap ETF.
Oakmark US Large Cap ETF OAKM
- Morningstar Category: Large Value
- Medalist Rating Process Pillar: High
- Medalist Rating People Pillar: High
- Medalist Rating Parent Pillar: Average
- Expense Ratio: 0.59%
“The fruit doesn’t fall far from the tree,” observes Morningstar’s Thomas about Oakmark US Large Cap ETF. One of the best ETFs amalgamates key features from mutual fund siblings Oakmark OAKMX and Oakmark Select OAKLX but focuses strictly on larger companies. The management team, led by legendary value investor Bill Nygren, maintains 30-40 holdings, focusing on what it considers to be cheap stocks.
Read Morningstar’s full report on Oakmark US Large Cap ETF.
Principal Focused Blue Chip ETF BCHP
- Morningstar Category: Large Growth
- Medalist Rating Process Pillar: Above Average
- Medalist Rating People Pillar: High
- Medalist Rating Parent Pillar: Average
- Expense Ratio: 0.58%
The team members at this top ETF play the long game, and they “are good at it,” says Morningstar’s Thomas. The team believes that owner-operators and managers who think like owners tend to make better operational and capital-allocation decisions; they therefore favor companies with such managers that also have long-term competitive advantages, and they avoid overpaying for these stocks. Principal Focused Blue Chip ETF maintains a high-conviction portfolio, featuring just 20-25 stocks.
Read Morningstar’s full report on Principal Focused Blue Chip ETF.
Primecap Odyssey Aggressive Growth POAGX
- Morningstar Category: Mid-Cap Growth
- Medalist Rating Process Pillar: Above Average
- Medalist Rating People Pillar: High
- Medalist Rating Parent Pillar: High
- Expense Ratio: 0.66%
Morningstar Director Robby Greengold calls this top-rated fund’s strategy “unconventional.” The team here pursues stocks that are off the beaten path and whose long-term prospects are being undervalued by the market. Primecap Odyssey Aggressive Growth’s managers also practice extreme patience, sometimes holding stocks for a decade or more. The fund invests in stocks of all sizes and owns between 150 and 200 stocks.
Read Morningstar’s full report on Primecap Odyssey Aggressive Growth Fund.
Should You Invest in These Top-Rated Funds?
The ETFs and mutual funds on this list are all highly rated. But that doesn’t mean they’re great fits for all investors. Here are a few things to consider before investing in the funds on this list.
The fund’s concentration risk. Several of the funds on this list practice high-conviction strategies, which means they invest in fewer stocks than typical ETFs and mutual funds do. Concentration can lead to more volatility. As a result, the funds on this list are best suited to patient, long-term investors who are comfortable with volatility.
The fund’s key-person risk. Some of the funds on our list are managed by teams led by notable managers with distinct styles. While plenty of talented managers have moved on or retired and left their funds in talented hands, key-person risk may be an issue with some of these funds down the road.
The fund’s tax risk. Given the buying and selling that goes along with active management—along with fundholder selling—the mutual funds on this list are best kept in a tax-deferred account. The ETFs on this list benefit from the ETF creation and redemption process, so taxes aren’t a big risk for them.
