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Summary Fund management is very frugal and the expense ratio is only 0.70%. The fund has earned 16% a year over the last 15 years. The fund tends to be relatively uncorrelated with other equity investments. Bruce Fund: Overall Objective and Strategy The primary objective of the Bruce Fund (MUTF: BRUFX ) is to achieve long term capital appreciation by investing primarily in domestic common stocks and bonds, including convertible bonds and “zero coupon” Treasury bonds. Income is a secondary consideration. The fund has built an outstanding long term performance record using a “barbell” type strategy. They often accumulate long-dated zero coupon Treasuries to seek capital appreciation when they feel there is an absence of viable common stock opportunities. But they will also buy higher risk debt securities and own some defaulted bonds selling at a small fraction of their par value. Their strategy is to use primarily bonds which have a very high yield to maturity, or to use convertible bonds which fluctuate with the common stock. Most of these higher risk bonds carry no credit rating. The Bruce Fund invests in domestic common stocks of any market capitalization, although they seem to focus mainly on smaller companies, as well as micro-cap securities. Both growth and value criteria are used to select these stocks. They actively pursue unseasoned companies, out-of-favor, turnaround and distressed situations. The Fund may invest in foreign securities, either directly or through ADRs or GDRs. At times, they hold a large cash position for a transitional period of time and the Fund tends to have a low “beta”. Fund Expenses The expense ratio for BRUFX is 0.70% which is very low for a fund that uses “hedge fund” style strategies. The Bruce Fund management is very frugal. One reason for the low BRUFX expense ratio is that they do not market their fund through discount brokers like Fidelity or Schwab. These brokers generally charge a mutual fund 40 basis points a year for the “privilege” of being on their platforms. Most mutual funds on these platforms offer “special” share classes with higher expense ratios to cover this platform fee. The Bruce Fund refuses to do this, and the fund can only be purchased directly. A mutual fund has to pay a yearly “Blue Sky” fee to every state where they sell the fund. Some small startup mutual funds only register in states where they have enough investors to make it worthwhile. The Bruce Fund started the same way, and until a few years ago, it was not available to Texas or Nebraska residents. But now it is available in every state. Minimum Investment BRUFX has a minimum initial investment of $1,000. Past Performance BRUFX is classified by Morningstar in the “Moderate Allocation” or MA category. BRUFX has blown away the competition and often ranks as the #1 fund in their category. Over the last 15 years, BRUFX has earned 16.37% a year, which trounces the category average of 5.19%. Here are the annual performance figures computed by Morningstar since 2006. 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD BRUFX 17.72% -5.13% -27.27% 32.26% 23.96% 7.24% 7.86% 18.95% 13.68% 2.56% Category (MA) 11.29% 5.99% -28.00% 24.13% 11.83% -0.11% 11.72% 16.48% 6.21% 2.58% Percentile Rank 4% 99% 41% 8% 1% 2% 76% 1% 1% Source: Morningstar Mutual Fund Ratings -Forbes Honor roll BRUFX is a member of the Forbes Mutual Fund Honor Roll. Forbes Up Market Grade: A+ Forbes Down Market Grade: A -Morningstar Rating : 5 Stars Fund Management The fund is managed by a father and son team, Robert and Jeffrey Bruce. They rarely speak to the press and spend none of their time marketing the fund, although they are glad to speak with shareholders who call. Instead of marketing the fund, they prefer to increase the assets via fund performance. Robert Bruce is 83 years old and previously helped to establish a great performance record at the Mathers Fund (MUTF: MATRX ) over forty years ago. In 1973, he left the Mathers Fund to manage his own money and eventually formed the Bruce fund in 1983 with his son. Bruce Fund Portfolio Analysis (as of December 31, 2014) Common Stock 48.5% Convertible Pfd. 1.8% Corporate Bonds 4.2% Convertible Bonds 5.4% U.S. Treasuries 16.9% Money Market 23.0% Other 0.2% Top 8 Equity Holdings (as of March 31, 2015) Amerco Inc (NASDAQ: UHAL ) 12.01% Allstate Corp (NYSE: ALL ) 3.23% IBM (NYSE: IBM ) 2.92% Airboss of America ( OTC:ABSSF ) 2.63% Pfizer (NYSE: PFE ) 2.21% Merck (NYSE: MRK ) 2.09% NextEra Energy (NYSE: NEE ) 1.89% Flotek Industries (NYSE: FTK ) 1.85% Source: Morningstar Comments It is common on Wall Street to hear fund managers talk about creating shareholder value. But when push comes to shove, the vast majority of mutual fund managers seem more concerned with growing assets under management (and maximizing their own fees) than with maximizing returns for shareholders. That explains the widespread popularity of mutual funds with 12b-1 fees. I give the Bruce Fund a lot of credit for refusing to use 12b-1 fees. They could probably attract a lot more assets if it was available on the discount broker platforms, even with a higher expense ratio. This would benefit the Bruce Fund managers, but would be detrimental to long term shareholders, would have to pay the higher fees every year. I have had a Roth IRA at the Bruce Fund for over ten years. They charge an annual IRA maintenance fee of $15. At first, I found this fee a little annoying, but on second thought I think it is very fair. It costs the fund a little more to administer IRA accounts, but rather than hike the expense ratio for everyone, they just charge this fee to those with IRA accounts. They also allow you to pay this fee with money outside your IRA, so the fee is tax deductible. The Bruce Fund managers are very frugal, but in a good way. The largest equity holding in the Bruce fund is Amerco, which currently trades for $325 a share. There is an interesting story behind this stock. Amerco is the parent company of U-Haul which was experiencing major problems back in 2003 including lawsuits and accounting irregularities. But the Bruce Fund managers liked the underlying business of renting trailers and the company owned a lot of undervalued real estate. Amerco filed for Chapter 11 in June 2003, but their management intended to leave the common equity intact and restructure the debt. Most institutional investors dumped their Amerco shares during this time period when the stock dropped as low as $2 a share. But the Bruce Fund managers stuck with the company and continued to buy more shares through the bankruptcy process. The stock has appreciated about 150 times since then. Another thing I like about the Bruce Fund is its low beta and relative lack of correlation with other equity investments. It has many hedge fund like attributes in the good sense without having to pay 2%/20% management fees. There is also a low turnover ratio, so BRUFX can also be a good investment in taxable accounts. If you want to purchase this fund, you cannot use a broker, and must buy direct. The fund web site is here . Disclosure: I am/we are long BRUFX. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.