BCSMX – About the Fund
The BCM Focus Small/Micro-Cap Fund is a mutual fund registered under the Investment Company Act of 1940. The Fund offers daily liquidity like other mutual funds, it has a trackable ticker (BCSMX), and it is available to investors on a direct basis. Despite this traditional mutual fund structure, the Manager and the Fund’s Board seek to cultivate a partnership “feel” by encouraging long-term investment by shareholders who embrace the investment philosophy and process of our Manager and who use the Fund for their exposure to smaller companies as part of a broader asset allocation strategy. The Manager and Fund’s Board believe that shareholders who invest directly with the Fund are more likely to make well-considered, non-impulsive decisions about buying, holding, and selling their shares.
Investors may open an account directly with us by completing our account forms and sending money to our custodian bank. Fund shareholders then receive periodic account statements detailing their Net Asset Value.
The Fund began operations on December 30, 2022, with an initial Net Asset Value per share of $10.
The Fund requires a minimum initial investment of at least $10,000. Additional purchases are not subject to this minimum. Additional important information is detailed in the Fund’s prospectus.
Fund Investment Principles
Small-Cap and Micro-Cap Companies
The Fund makes investments in US small-cap and micro-cap companies, which are generally categorized as the smallest 10% of investible public companies. Under normal circumstances, at least 80% of the Fund will focus on this selection universe when making initial investments; however, the Fund may continue to hold, buy, and sell larger companies, believing that if a portfolio holding continues growing its fundamental value, it may be worth continued investment after exceeding the upper bound for purchase. The Fund believes that the small-cap and micro-cap categories are especially productive areas for the Manager to apply its qualitative sourcing, vetting, and analytical frameworks given the number of opportunities in the space and the data supporting the relative outperformance and persistence of smaller companies.*
Portfolio Concentration
The Fund is classified as “non-diversified,” which means that the Fund may concentrate its capital in fewer investments than diversified funds. While this portfolio concentration may create more price volatility for Fund investors, research indicates that a portfolio of a manager’s “best ideas” tends to outperform diversified portfolios as a whole,** and portfolio diversification benefits tend to asymptotically degrade with fewer portfolio positions than most managers hold. This may be reflective of an industry preference to hold more portfolio positions as a means to accommodate more fee-paying assets rather than an intellectually honest exercise in portfolio performance optimization. As the Fund scales assets under management, the intent is to ultimately limit capacity at a level that allows for continued concentration in a portfolio of small-cap and micro-cap companies.
Industry Focus
The Fund has elected to invest at least 25% of its net assets in the Software & Services Industry Group within the Information Technology Sector. The Manager believes this industry group contains many businesses with attractive qualitative characteristics that service a broad array of end markets, thereby enabling fundamental diversification within a single industry group. Companies in this industry group can exhibit attractive qualitative characteristics such as network effects, customer lock-in, switching costs, asset-light recurring revenue, product differentiation, and conforming standards. Without such an industry election, the Fund’s exposure to any single industry group would be capped by regulation at 25%.
*Source: Center for Research in Security Prices (CRSP), an affiliate of the Chicago Booth School of Business. as of 12/31/2022, the smallest 10% of companies included 1606 firms compared to 180 firms in the largest 10% of companies. The smallest 10% outperformed the largest 10% on monthly rolling 5-year and 10-year periods by an average of 3.54% and 3.34% respectively from 07/1926 through 12/2022. This quoted data represents past performance and is not indicative of future results. Current performance may be lower or higher than the data quoted.
**The best ideas of active mutual funds or hedge fund managers tend to outperform the market and other stocks in their portfolio by between 2.8% and 4.5%. From “Best Ideas” – Miguel Anton, Randolph Cohen, and Christopher Polk – April 2021. Available at SSRN: https://ssrn.com/abstract=1364827