Small Cap Blend fund seekers may want to consider taking a look at USAA Small Cap Stock Fund (USCAX Quick QuoteUSCAX - Free Report) . USCAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify USCAX in the Small Cap Blend category, an area rife with potential choices. Small Cap Blend mutual funds usually target companies with a market capitalization of less than $2 billion. A small-cap blend mutual fund allows investors to diversify their funds among various types of small-cap stocks, which can help reduce the volatility inherent in lower market cap companies.

History of Fund/Manager

Victory is based in Columbus, OH, and is the manager of USCAX. USAA Small Cap Stock Fund debuted in August of 1999. Since then, USCAX has accumulated assets of about $559.11 million, according to 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 carries a 5-year annualized total return of 8.03%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of -2.06%, 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. Compared to the category average of 17.45%, the standard deviation of USCAX over the past three years is 21.48%. Looking at the past 5 years, the fund's standard deviation is 24.02% compared to the category average of 19.27%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. USCAX has a 5-year beta of 1.17, which means it is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -7.06. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is primarily on equities that are traded in the United States.

Right now, 91.13% of this mutual fund's holdings are stocks, with an average market capitalization of $3.93 billion. The fund has the heaviest exposure to the following market sectors:

• Technology
• Industrial Cyclical
• Finance
• Health

This fund's turnover is about 55%, so the fund managers are making fewer trades than the average comparable fund.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, USCAX is a no load fund. It has an expense ratio of 1.03% compared to the category average of 0.98%. So, USCAX is actually more expensive than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $50

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

Bottom Line

Overall, even with its comparatively similar performance, average downside risk, and higher fees, USAA Small Cap Stock Fund ( USCAX ) has a neutral Zacks Mutual Fund rank, and therefore looks a somewhat average choice for investors right now.

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