Microcap Fund Shows Big Gains

After stints in the Peace Corps, Wall Street, various banks and Harvard Business School, Daniel Chace joined Wasatch Advisors as an analyst in 2002 before becoming manager of the firm’s Wasatch Micro Cap fund by 2004. This according to a recent article in Barron’s.

Influenced by his life experiences, Chace favors businesses in a “less-trafficked corner of the market—companies with a market value of $100 million to $1.5billion” and targets those that he and co-manager Kenneth Korngiebel think are tomorrow’s “greatest growth companies.”

Over the past year, the fund returned 31%–which, according to Morningstar data, beat 92% of small-cap growth funds. “The fund’s 1.67% expense ratio,” the article says, “is pricier than the average small-cap growth fund, but the duo hunt further afield than peers, and the team keeps fund assets to a manageable level.”

Pointing out that microcaps come with volatility and that the fund suffered a 49% loss in 2008, the article reports that Chace has adjusted his criteria over the years and is now “casting a wider net.” The fund’s performance, the article says, has improved since the financial crisis and has “suffered less” than the average small-cap growth fund over the past three years.

“If all you do is invest in innovation and the fastest-growers, you have a more volatile, hit-driven portfolio,” Chace argues. “We decided we were OK with slower growers that have consistent margin expansion.”