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Looking for a Small Cap Growth fund? Getting started with Brown Capital Management Small Company Investor (BCSIX) should not be a possibility at this time. BCSIX carries a Zacks mutual fund ranking of 4 (sell), which is based on nine predictor factors such as size, cost and past performance.

Objective

BCSIX is one of many Small Cap Growth funds to choose from. Small Cap Growth Mutual Funds build portfolios around stocks with market capitalizations below $2 billion and great growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and sectors.

Fund/manager history

Brown Capital Management is based in Rocky Mount, North Carolina and is the manager of BCSIX. Brown Capital Management Small Company Investor got its start in July 1992, and since then BCSIX has accumulated approximately $2.29 billion in assets, according to the most recent date available. The current fund manager is a team of investment professionals.

Performance

Clearly, 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 ranks in the top third among its peers in the category. If you’re interested in shorter timeframes, don’t discount the fund’s 3-year annualized total return of 18.49%, which puts it in the top third over that time frame.

When looking at a fund’s performance, it’s also important to note the standard deviation of returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of the BCSIX over the past three years is 19.46% from the category average of 13.49%. The standard deviation of the fund over the last 5 years is 18.27% against a category average of 13.17%. This makes the fund more volatile than its peers over the past half-decade.

Risk factors

However, the volatility of this segment cannot be ignored, as it is always important for investors to remember the downsides of any potential investment. In the case of BCSIX, the fund lost 40.91% in the last bear market and outperformed its peer group by 12%. This makes the fund a better choice than its peers in a falling market environment.

Investors should note that the fund has a 5-year beta of 1.26, so it is likely to be more volatile than the market as a whole. Since alpha represents the performance of a portfolio on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, it is also worth paying attention to this measure. With a positive alpha of 2.11, the managers of this portfolio know how to choose securities that generate higher returns than those of the benchmark index.

Expenses

For investors, it is essential to take a closer look at cost-related metrics, as costs are increasingly important for mutual fund investments. 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 each subsequent investment must be $500.

Conclusion

Overall, Brown Capital Management Small Company Investor (BCSIX) has a low Zacks mutual fund ranking, and in conjunction with its relatively strong performance, worse downside risk, and lower fees, this fund appears to be a somewhat poor choice for investors at the moment.

Don’t stop here for your research on Small Cap Growth funds. We also have a lot more on our site to help you find the best possible fund for your portfolio. Be sure to check out www.zacks.com/funds/mutual-funds for more insight into the world of funds, and feel free to compare BCSIX to its peers for more insight. Zacks provides a full suite of tools to help you analyze your portfolio – funds and stocks – in the most efficient way possible.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.