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

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On the lookout for a Small Cap Growth fund? Starting with Brown Capital Management Small Company Investor (BCSIX - Free Report) should not be a possibility at this time. BCSIX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

BCSIX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

Brown Capital Management is based in Rocky Mount, NC, and is the manager of BCSIX. Brown Capital Management Small Company Investor made its debut in July of 1992, and since then, BCSIX has accumulated about $2.29 billion in assets, per the most up-to-date date available. 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. BCSIX has a 5-year annualized total return of 15.12% and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 18.49%, 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. The standard deviation of BCSIX over the past three years is 19.46% compared to the category average of 13.49%. The fund's standard deviation over the past 5 years is 18.27% compared to the category average of 13.17%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In BCSIX's case, the fund lost 40.91% in the most recent bear market and outperformed its peer group by 12%. This makes the fund a possibly better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.26, so it is likely going to be more volatile than the market at large. 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. With a positive alpha of 2.11, managers in this portfolio are skilled in picking 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 1.25% compared to the category average of 1.26%. Looking at the fund from a cost perspective, BCSIX is actually cheaper than its peers.

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

Bottom Line

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

Don't stop here for your research on Small Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare BCSIX to its peers 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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