Buffalo Small Cap: Keep It Or Dump It?

BUFSX has been part of my taxable investment portfolio since the beginning of 2002 when I started to invest. Since then, I have been dollar-cost-averaging $100 into this fund every month and the fund’s return was superior: 51.2% in 2003 and 28.8% in 2004 according to Morningstar.

However, the fund started to lag not only its peers, but also the benchmark since 2005, when it lost its one manager. Meanwhile, the total assets ballooned to $1.6B, the size that becomes a burden for a small cap fund in finding quality companies to invest. On top of its size, the fund also has an expense ratio of 1.01%. Now, BUFSX is the worst performer in my portfolio.

I am a big fan of small cap funds and have owned several small cap funds in the past. At the beginning of this year, I trimmed my holds and now only have two: BUFSX and CGMFX. If I want to dump BUFSX, I need to find a replacement small cap fund and that won’t be an easy job after small cap has outperformed large cap for more than five years.