Small-cap growth mutual funds seek to provide a greater growth potential than the large- and mid-cap ones in an improving domestic economy. This is because small-cap stocks are closely tied to the domestic economy and have less international exposure. So, small-cap growth mutual funds are safer bets than their large- and mid-cap counterparts following the recent developments in the U.S. economy.

Companies with market capitalization below $2 billion and an impressive growth prospect generally constitute the portfolio of these mutual funds. Though small-cap stocks are believed to provide higher returns, they are also considered more volatile than the large- and mid-cap companies. These mutual funds provide excellent choices for investors preferring long-term capital appreciation over dividend payouts while seeking to protect their investments from global growth concerns.

Below we share with you three top-ranked small-cap growth mutual funds. 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 small-cap growth funds.

Franklin Small Cap Growth Class A (FSGRX - Free Report) seeks appreciation of capital for the long run. FSGRX invests a bulk of its assets in the equity securities of small cap companies whose market-cap does not exceed $1.5 billion or that have the largest market capitalization in the Russell 2000 Index, whichever is larger. Franklin Small Cap Growth Class A has returned 23% over the last one-year period.

FSGRX has an expense ratio of 1.11% compared with the category average of 1.29%.

Hartford Small Company HLS (HDMBX - Free Report) invests in common stocks of companies that have strong capital growth potential. HDMBX’s sub-adviser, Wellington Management Company, LLP, invests the lion’s share of its assets in common stocks of companies that fall within the range of both the Russell 2000 and S&P SmallCap 600 Indices. The fund seeks appreciation of capital. Hartford Small Company HLS has returned 26% over the last one-year period.

As of March 2017, HDMBX held 233 issues, with 2.24% of its assets invested in
Insulet Corp.

JPMorgan Small Cap Growth (PGSGX - Free Report) seeks long-term growth of capital. PGSGX invests heavily in securities issued by small capitalization companies. The fund also invests in securities of emerging growth companies. The small capitalization companies are those whose market capitalization is similar to that of Russell 2000 Growth Index stocks. JPMorgan Small Cap Growth has returned 39.8% over the last one-year period.

Greg Tuorto is one of the fund managers of PGSGX since 2016.