Is Brown Capital Management Small Company Investor (BCSIX) a Strong Mutual Fund Pick Right Now?

If you have been looking for Small Cap Growth funds, it would not be wise to start your search with Brown Capital Management Small Company Investor (BCSIX). BCSIX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Small Cap Growth funds is an area filled with options, such as BCSIX. These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than $2 billion. The companies in these portfolios are usually on the smaller side, and are in up-and-coming industries and markets.

History of Fund/Manager

Brown Capital Management is based in Rocky Mount, NC, and is the manager of BCSIX. Since Brown Capital Management Small Company Investor made its debut in July of 1992, BCSIX has garnered more than $110.52 million in assets. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of -6.1%, and it sits in the bottom third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of -0.6%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of BCSIX over the past three years is 20.54% compared to the category average of 15.28%. Over the past 5 years, the standard deviation of the fund is 21.4% compared to the category average of 16.73%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.04, so it is likely going to be more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. BCSIX's 5-year performance has produced a negative alpha of -16.39, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, BCSIX is a no load fund. It has an expense ratio of 1.44% compared to the category average of 1.05%. From a cost perspective, BCSIX is actually more expensive than its peers.

While the minimum initial investment for the product is $5,000, investors should also note that each subsequent investment needs to be at least $500.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Brown Capital Management Small Company Investor ( BCSIX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.

Your research on the Small Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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This article originally published on Zacks Investment Research (zacks.com).

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