Surging gold prices got more attention in 2025’s third quarter, but US small-cap funds got a measure of revenge. Outside of the US, exposure to China separated winners from losers.
All That Glitters
Record bullion prices made the equity precious-metals Morningstar Category the best-performing mutual fund peer group of the three months ended Sept. 30, 2025.
Gold ended the third quarter up about 16.2%, as measured by SPDR Gold Shares GLD. Precious-metals miners, which often behave like leveraged plays on the price of the rare commodities they exhume, rallied even harder. The mean equity precious-metals fund jumped 43.8% in the quarter and was up 117.6% for the year through the end of September. The volatile Sprott Gold Equity SGDLX, which recently lost a key comanager to retirement, rose 43.9% as Coeur Mining CDE, SSR Mining SSRM, and Equinox Gold EQX posted more than 90% gains in the quarter.
Fair Turnabout
Small-cap fund categories, which have spent much of the past decade lagging their larger brethren, turned the tables in the third quarter. Small value was the best Morningstar Style Box category, rising 8.3%, while small blend gained 8.2%, and small growth increased 7.5%. For the year, they each gained between 5.2% and 6.3% but still lagged the large-cap groups, which put up respectable 5.5% to 7.6% gains in the period and double-digit advances for the year to date.
Gold influenced one of the quarter’s best-performing small-value funds that Morningstar analysts cover. Coeur Mining’s 111.7% jump lifted First Eagle Small Cap Opportunity FESCX ahead of 96% of its peers. Manager Bill Hench and his team are not afraid to buy statistically cheap micro- and small-cap stocks and wait for them to rebound. It’s a volatile approach that has rewarded the patient.
Optimism about increased defense spending helped another contrarian, Neuberger Berman Intrinsic Value NINLX, which was among the top-ranked small-cap blend funds that Morningstar analysts follow. Viasat VSAT, a satellite communications firm with a burgeoning defense business, propelled results in the third quarter, rising more than 100%.
Growth Never Sleeps
Large-cap growth funds did not take a complete holiday in the quarter, though.
Advertising technology stock AppLovin APP, which gained 105.3% in the period, drove Alger Focus Equity’s ALGRX results, which ranked ahead of 99% of large-growth funds. The high-flying stock is the type of aggressive growth company to which managers Patrick Kelly and Ankur Crawford gravitate.
Resurgent biotech stocks like Precigen PGEN, which rose 131.7% in the period, boosted Patient Opportunity LMNOX, an iconoclastic value fund run by Samantha McLemore, who, like her predecessor Bill Miller, has a high tolerance for volatility. The fund’s quarterly returns were ahead of 99% of mid-value funds, but its long-term returns still lagged key benchmarks.
A small position in AppLovin helped Primecap Odyssey Growth POGRX, but so did artificial-intelligence-enabled manufacturing equipment supplier Xometry XMTR and Alibaba Group BABA, which rose 61.2% and 57.6%, respectively.
A Software Spot
Software, consulting, and financial data companies seem to be the Achilles’ heels of funds like Baron Growth BGRFX and Akre Focus AKRIX, whose losses put them at the bottom of their respective categories for the quarter.
Software firms Topicus.com TOITF, Constellation Software CNSWF, and Roper Technologies ROP each surrendered double digits in the quarter and weighed on Akre Focus, which will convert to an exchange-traded fund in October. The fund’s high fees and small team remain concerns.
Stocks like FactSet Research Systems FDS and Gartner IT, both down around 35% in the quarter, hindered Baron Growth. Veteran manager Ron Baron’s strong long-term record still makes it a solid choice, though.
Getting a Boost From Chinese Stocks
Among non-US categories, China region, Pacific/Asia ex-Japan stock, and diversified Pacific/Asia were among the best, gaining 21.2%, 11.6%, and 9.9%, respectively.
Thornburg Global Opportunities THOIX, Fidelity Advisor Focused Emerging Markets FIMKX, Davis International DILAX, and Selected International SLSDX each ranked in the top 5% of their respective peer groups for the quarter and had top-quartile year-to-date rankings, partly owing to larger-than-average helpings of Chinese stocks.
Rallying telecommunications stocks like UK holding company Zegona Communications ZEG, US-based Alphabet GOOGL, and Chinese internet marketplace Alibaba did most of the heavy lifting for Thornburg Global Opportunities, which, despite some recent analyst turnover, has retained its flexible, focused approach.
Fidelity Advisor Focused Emerging Markets, which remains closed to new investors, benefited from stakes in Tencent TCEHY and Alibaba. Manager Sam Polyak’s concentrated, research-driven approach has delivered strong long-term results versus the MSCI Emerging Markets Index.
Large helpings of Chinese stocks drove Davis International and Selected International near the top of the foreign large-blend category. The funds’ manager Danton Goei, a longtime China bull, had about a third of those portfolios in Chinese stocks like DiDi Global DIDIY, which jumped 26.9% in the quarter. The funds’ overall China exposure is even larger when you consider holdings like Prosus PRX, a Dutch holding company with a big stake in Tencent, which also leapt 26.9%.
An aversion to China explained much of the underperformance of Morgan Stanley Institutional Global Franchise MSFAX, Invesco Global Small Cap Equity ESMAX, and Neuberger Berman International Select NILTX, which ranked near the bottom of their categories for the quarter and for the year to date.
Morgan Stanley Institutional Global Franchise also owned falling software stocks like SAP SAP and Accenture ACN. Manager William Lock and his team, who focus on profitable, capital-light businesses, still have a strong long-term record, though; the fund usually shows its mettle on the downside.
Neuberger Berman International Select’s lack of China exposure held it back, but its experienced team and flexible, mid-cap-focused approach still make it a solid option. Invesco Global Small Cap Equity is a completely different case, though. The former Invesco EQV European Small Company got a new management team, process, and name in August 2025, creating significant uncertainty.