Psst: Want to get in on the next Google? The initial public offering market just keeps getting hotter last week, LinkedIn joined Skype on the list of big names expected to go public this year but small investors are often shut out of the action. The fund industry thinks it has the next best thing: Three mutual funds that specialize in IPO investments. Are they worth a look?

Investing early in a growing company can certainly pay off, but it's a risky bet. Many newly public companies, even ones that see an early "pop," underperform over the long term, says Bill Buhr, an IPO strategist with Morningstar. With the pace of deals picking up, a broad IPO vehicle could outperform in the short term, but investors should be aware that there's a wide range of performance among individual deals, Buhr says. A strategy that shorts some "junky" deals could have potential if done right, he says. An IPO fund also runs the risk of becoming highly concentrated in whatever sector is "hot" at the moment, Buhr says. For example, nearly 30% of IPOs issued in the U.S. last year were for China-based companies.

There are three IPO-specific funds on the market, each with a different approach. The oldest, Renaissance Capital's $10.9 million IPO Plus Fund, was started in 1998 in the midst of that decade's IPO fever. The company both manages the fund and provides research on public offerings to institutional investors. The fund's managers buy shares of newly public companies they believe will outperform, getting in on the IPO when possible, as well as snapping up shares on the secondary market.

Because newly public firms are often small, the best benchmark for IPO Plus is a mid-cap growth index, according to fund-tracker Morningstar, and here the fund has lagged over the long- and short-term. Over the past 10 years, it lost 4.5%, while the mid-cap category gained 3%, and over the past 12 months it rose 16.4% compared to a 30.3% for the category. "It's been a very tough 10 years for the IPO market, on average," says Linda Killian, the fund's portfolio manager. "When IPOs do well, we do well," and IPOs began to pick up mid-year last year, she says. The fund is also expensive, charging 2.47% in expenses, compared to the average mid-cap growth fund's 1.45%. About 1.5% of that is a management fee, which reflects the proprietary research Renaissance does on every deal in its portfolio, Killian says.

The $15.6 million First Trust US IPO Index Fund (FPX) is an exchange-traded fund that tracks an index of the largest IPOs in the U.S. market, rebalancing quarterly and holding strong performers for 4 years after they go public. The strategy is to buy shares of strong companies before they join broad indexes like the S&P 500, says Josef Schuster, the CEO and founder of IPOX Capital Management, which provides the index behind the fund. The index's design avoids smaller, riskier IPOs, and the fund has been able to capture the early growth of major companies like Visa (V) and MasterCard (MA), Schuster says. More recently, the fund invested more than 10% of its assets in General Motors (GM), buying shares at $33.50, for a gain of roughly 9%. Overall, the portfolio has gained more than 23% in the past year, beating the S&P 500 by 3 percentage points. The fund charges 0.6% in expenses, more than a simple S&P 500 index fund like the SPDR S&P 500 (SPY) which charges just 0.09%, but close to the overall average for ETFs, which is about 0.5%.

The newest entrant on the market offers a new twist: It bets against IPOs, along with investing in them. The $14.7 million Direxion Long/Short Global IPO Fund, also based on IPOX Capital Management's methodology, is actively managed and seeks to be short recent IPOs they believe will underperform while taking long bets on companies they see as strong. Like the Renaissance Capital fund, it also has the ability to participate in initial offerings in some cases. For example, the fund was able to buy General Motors (GM) at $33 and Tesla Motors (TSLA) at $17. As a long-short fund, it's designed to be uncorrelated to the broader market, underperforming in a strong bull market and performing best when markets are stressed and IPOs are cheap, Schuster says. It has fallen far behind the S&P 500 since its inception in mid-2010, gaining just under 6%. The fund has beaten the long-short category in two out of three quarters so far, according to data from Morningstar, but its 1.2% loss year-to-date lags the category's 0.6% gain.

Corrections & Amplifications
The original version of this story misstated the expense ratio for the SPDR S&P 500.