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

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There are plenty of choices in the Small Cap Growth category, but where should you start your research? Well, one fund that may not be worth investigating is Brown Capital Management Small Company Investor (BCSIX - Free Report) . BCSIX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine 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

BCSIX is a part of the Brown Capital Management family of funds, a company based out of Rocky Mount, NC. The Brown Capital Management Small Company Investor made its debut in July of 1992 and BCSIX has managed to accumulate roughly $2.30 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 15.11%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 18.52%, which places it in the top third during this time-frame.

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. Compared to the category average of 12.39%, the standard deviation of BCSIX over the past three years is 19.13%. The standard deviation of the fund over the past 5 years is 18.25% compared to the category average of 12.84%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. BCSIX lost 40.91% in the most recent bear market and outperformed its peer group by 12.13%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Nevertheless, with a 5-year beta of 1.28, the fund is likely to be more volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. Over the past 5 years, the fund has a positive alpha of 3.41. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BCSIX is a no load fund. It has an expense ratio of 1.24% compared to the category average of 1.22%. BCSIX is actually more expensive than its peers when you consider factors like cost.

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.

Bottom Line

Overall, Brown Capital Management Small Company Investor ( BCSIX ) has a low Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.

For additional information on the Small Cap Growth area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into BCSIX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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