Membership has its privileges, but fortunately you don’t have to belong to the National Rural Electric Cooperative Association (NRECA) to invest in its top-performing growth fund, Homestead Small-Company Stock (HSCSX). Founded in 1942, the NRECA is the trade association for some 900 consumer-owned rural power systems; in 1990, the association established the Homestead Funds to provide professional asset management to the employees of its member utilities. But the eight Homestead funds continue to be open to all investors.

Homestead largely eschews glitzy marketing, letting its funds’ performance speak for itself. Small-cap stocks have had quite a run the past 10 years, but the mostly small-cap HSCSX has managed to do even better—nearly tripling investors’ money. Over that same period, both small caps and the broad market more than doubled investors’ money, but still lagged the fund by a wide margin. Part of the fund’s success is likely due to its seasoned management team. Two of the three portfolio managers have been at the helm since the fund’s inception in early 1998, while the third joined less than a year later, after being lured away from the American Funds.

Management applies a classic value strategy to the universe of stocks with market capitalizations of $2 billion or less. They seek beaten-down names that have a potential catalyst for a turnaround, such as a refocused business plan, a new management team, a better business climate, or the likelihood of a buyout.

Smaller companies tend to have fewer Wall Street analysts tracking their performance. To overcome the dearth of information, management often meets with these firms’ executives several times while evaluating the company’s prospects. Additionally, Homestead’s portfolio managers complement their fundamental analysis with daily meetings of the equity and bond teams to arrive at a top-down view of industries and the economy as a whole. Recently, the fund’s three-largest sector allocations were industrials (25 percent), consumer staples (15 percent) and consumer discretionary (13 percent).

While the fund’s two largest holdings are exchange-traded funds that track small-cap indexes, HSCSX is no benchmark hugger. The concentrated portfolio of just over 50 holdings goes beyond the small-cap arena, with sizable slugs of micro- and mid-cap stocks. And management invests with conviction, as evidenced by a portfolio turnover ratio that’s been in the single digits for the past three years.

During the second quarter, the fund initiated a small position in Dycom Industries (NYSE: DY), a contractor that provides engineering, construction and installation services to the cable and telecom industries. It also boosted its existing position in Applied Industrial Technologies (NYSE: AIT) by a third, making the maintenance-product distributor the fourth-largest position in the portfolio.

While HSCSX has moderately lagged the market year to date, it has trounced both the market and its category peers over the three-, five- and 10-year trailing periods, while incurring volatility roughly in line with the benchmark small-cap Russell 2000 index.

With inexpensive fees, steady management and stellar returns, HSCSX should perform well on a relative basis even when small caps falter.