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 Federated Hermes Kaufmann Small Cap A (FKASX). FKASX possesses a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

FKASX 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

Federated is based in Pittsburgh, PA, and is the manager of FKASX. Federated Hermes Kaufmann Small Cap A debuted in December of 2002. Since then, FKASX has accumulated assets of about $654.18 million, according to the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 4.7%, and is in the bottom 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 0.22%, 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 15.68%, the standard deviation of FKASX over the past three years is 20.31%. Looking at the past 5 years, the fund's standard deviation is 23.33% compared to the category average of 17.14%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.14, 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. FKASX's 5-year performance has produced a negative alpha of -11.26, which means managers in this portfolio find it difficult to pick 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, FKASX is a load fund. It has an expense ratio of 1.35% compared to the category average of 1%. So, FKASX is actually more expensive than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $1,500; each subsequent investment needs to be at least $100.

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

Bottom Line

Overall, Federated Hermes Kaufmann Small Cap A ( FKASX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.

Your research on the Small Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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