Minifunds, Maxi Gains

Soon, you'll be able to track tiny outperformers

When it comes to mutual-fund performance, Jonas Ferris thinks size matters--small size. Ferris, a former securities analyst and fund marketer, observes that many funds with assets under $25 million beat multibillion-dollar competitors. That's because they tend to be nimbler. Unlike Magellan-size rivals, they can easily take positions in promising small companies without driving their stocks through the roof. If successful, the investments can give the funds' small portfolios a huge boost. A recent study by Boston-based Financial Research Corp. of 766 funds with 10-year track records found that small, generally young funds on average delivered returns of 80 basis points a year over their category averages.

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