A Web site launching next week promises to spotlight "undiscovered" mutual funds, a category brimming with promise -- and peril.

MAXfunds.com is the creation of four co-founders ranging in age from 28 to 30, three of whom are college and business-school friends. They hope two wrinkles will help their site stand out among a crowd of competitors: a focus on small and up-and-coming funds, and proprietary tools that weigh whether a fund is too big, takes too much "hot" money or stands to benefit from its parent company's stature.

Jonas Max Ferris, 28, one of the founders, says the site developed around the idea that small and new funds often outperform larger, older funds. He cites a 1998 study from Boston fund-tracker

Financial Research

, which found that over a 10-year period, the smallest 25% of funds routinely outperformed the largest 25% of funds, as well as the average fund.

Of the top 50 funds each year, half are often less than 3 years old and have less than $150 million in assets, Ferris says. A look at last year's top 50 funds proves him right. So, in addition to offering performance and portfolio information on 1,500 no-load stock funds, MAXfunds presents a selection of new and obscure funds you've probably never heard of. (Only no-load stock funds with 12b-1 marketing fees below 0.25% are included. This cutoff excludes many well-known fund groups, including top dog

Fidelity

.)

Despite often impressive performance, many new funds labor in obscurity, racking up their best returns before they get a five-letter ticker symbol from

Nasdaq

-- the ticket to most online fund databases and ratings. (A fund typically needs $25 million in assets or a three-year record to qualify for a ticker.) By highlighting new funds and "sleepers" without tickers, the site hopes to "shine a light on a hidden part of the fund industry," says Ferris. In addition to adding new and obscure funds to its database, the site will comment on those funds and post manager interviews.

One new gem that may have slipped beneath your radar, for example, is the $36.3 million

Turner

(TTECX)

Technology fund, which launched last July. The fund rose 158% from July to year-end, but didn't get a ticker until the year was almost over. In the fourth quarter, the fund rose nearly 84%, beating its average peer by 20 percentage points, according to

Lipper

. This year the fund is ahead of most peers, up more than 6%, while the average stock fund is underwater.

Ferris also notes a more mature, but just as obscure highflier,

Reserve

(RIGAX) - Get Report

Informed Investors Growth, where Manager Tom Fitzgerald Jr. mirrors insider trades at growth companies. The large-cap fund has ridden the unorthodox strategy to a 37% average annual return over the past five years, which beats the

S&P 500

index and 93% of the fund's peers, according to

Morningstar

. Started at the end of 1994, the fund has just $9 million in assets. The average U.S. stock fund is more than 100 times bigger.

Keep in mind, though, that investing in new funds can be a crapshoot. For all the new funds that streak out of the blocks and the pipsqueaks that shoot the lights out, there are plenty of new and small funds that sag and are merged away.

"There's a survival bias when you go back and look at new funds because you only see new funds that survived," says Russell Kinnel, director of fund analysis at

Morningstar.com

, where new funds show up once they get a ticker.

Even when small and/or new funds heat up, they can be dicey long-term investments because they're taking big bets and typically have higher expenses, says Robert Kiehl, a financial planner with

H.C. Denison

in Sheboygan, Wis.

Also, many new funds' records can be deceiving. Some get an extra performance boost from investing in initial public offerings. A relatively small allocation of rocketing IPO shares can make a big impact on a small fund's returns. Just last month, in the wake of last year's

boffo returns for tech and small-cap funds,

Securities and Exchange Commission

Chairman

Arthur Levitt

warned fund investors to be wary of small, young funds with great records since those returns will be "more difficult to sustain" as other investors discover the funds. (For more of Levitt's fund-investing wisdom, see the

SEC Web site.

"It's not like every new fund is a great investment and every old fund stinks," concedes Ferris, adding that the site's aim is to show investors funds they typically wouldn't run across for months or even years. Beyond offering prospectuses and applications, the site aims to preview new funds each week, which it hopes helps investors to separate promising funds from ill-conceived gimmicks.

If nothing else, the site's new-fund focus could help investors stay on top of burgeoning themes.

"I think a site like this that's looking below the radar screen will seek out what the future is really all about -- funds focusing on new trends in technology and biotechnology, more subsector related than your typical vanilla large-cap growth fund," says Joel Davis, a senior financial planner with

American Express Financial Advisors

in Portland, Maine.

If new funds aren't your bag, the site's proprietary

Fat Fund Index

could make the trip worthwhile. The index rates whether the size of a fund's asset base is likely to hamstring returns. Other proprietary measures include the

Hot Money Index

, which rates the likelihood of a fund being burned by short-term investors, and the

Family Advantage Index

, which measures whether a fund will benefit from its adviser's size and resources.

The presentation of fund data breaks the rules too. Nearly every number, including turnover, expenses and risk, is shown on a graphic scale compared with those of peers. To some, the scales may appear simplistic (the site's headline font looks like it's borrowed from a

Ren and Stimpy cartoon), but the data are presented in context, rather than as stand-alone numbers, which adds a rare and helpful perspective. Raw data are also available for the spreadsheet-inclined.

MAXfunds.com is shy about disclosing how each measure is calculated, and such measures may not make sense for all funds. For example, saying a small-cap growth fund focusing on thinly traded stocks is too big when it hits $750 million is more relevant than declaring that a large-cap growth fund is too big when it hits $2 billion, given the success of behemoths like $35 billion

Janus

(JAVLX)

Twenty.

"I don't think these are magic formulas, but they're interesting angles," says Morningstar's Kinnel.

Morningstar, creator of the ubiquitous star rating system, might be hearing more from Ferris and Co. down the road. Ferris, who has launched a Russia fund in the past and worked in marketing and investment roles at fund companies, including the infamous

American Heritage fund, has big plans. MAXfunds.com will launch its own fund-rating system this year, and hopes to eventually sell fund shares through its site.