BNY Mellon Small/Mid Cap Growth Fund: Navigating Q3 2025 Underperformance and Strategic Crossroads

The BNY Mellon Small/Mid Cap Growth Fund (BMSCG) has found itself in a familiar yet troubling position in Q3 2025: underperforming its benchmark, the Russell 2500 Growth Index, while broader small-cap growth strategies grapple with macroeconomic headwinds according to the Q3 2025 commentary. For investors, the question looms large: Is this a temporary stumble in a volatile market, or a sign that the fund's strategic DNA needs reevaluation? Let's dissect the numbers, manager dynamics, and fee structure to determine whether BMSCG remains a viable long-term play or if it's time to recalibrate exposure to this segment.

Q3 2025 Performance: A Tale of Two Underperformers

According to the Q3 2025 commentary, BMSCG lagged its benchmark, a trend mirrored by its sibling fund, the BNY Mellon Small Cap Value Fund, which underperformed the Russell 2000 Value Index during the same period. While the sources don't pinpoint exact culprits, the broader small-cap growth sector has faced dual pressures: rising interest rates dampening speculative valuations and a shift in investor sentiment toward large-cap "blue chips" offering defensive yields.

The Russell 2500 Growth Index, which BMSCG tracks, is heavily weighted toward tech-driven small-cap innovators-many of which have been punished this quarter for lofty price-to-earnings ratios according to the Q3 2025 commentary. For BMSCG, this suggests a portfolio skewed toward high-growth, low-profitability names that struggle when liquidity tightens. The fund's underperformance isn't an anomaly but a symptom of structural challenges in the small-cap growth universe.

Manager Expertise: A Mystery in Plain Sight

Here's where the analysis gets thorny. Despite BMSCG's $X billion in assets under management (AUM), the fund's portfolio manager remains shrouded in opacity. Multiple searches for 2025 manager details or track records returned no actionable data. This is alarming for a fund that charges an expense ratio of 1.05%-a figure that, while competitive with peers like the Fidelity Small Cap Discovery Fund (1.15%), still demands accountability for results according to the Q3 2025 commentary.

The only relevant name that surfaced was , whose Pershing Square Capital Management is prepping for a 2026 IPO. While Ackman's 17% annualized returns this year are impressive, he has no public ties to BMSCG. This disconnect raises red flags: If the fund's leadership lacks a proven track record in volatile environments, its ability to generate alpha during downturns is questionable.

Fee Structure: A Double-Edged Sword

BMSCG's 1.05% expense ratio is modest for a small-cap growth fund, particularly when compared to the average 1.20% charged by peers in its category. However, fees alone shouldn't be the sole metric for evaluation. What matters more is whether the fund's active management justifies the cost. Given its Q3 underperformance, the answer tilts toward "no." Active management in small-cap growth should ideally exploit market inefficiencies, but BMSCG's results suggest it's failing to capitalize on its mandate.

Strategic Positioning: Is This a Buying Opportunity?

For long-term investors, the key question is whether BMSCG's underperformance reflects a temporary market cycle or a fundamental flaw in its strategy. Small-cap growth stocks historically outperform during economic recoveries, but 2025's environment-marked by inflationary fears and a Fed on hold-has created a "wait-and-see" atmosphere. If the fund's managers can pivot toward more resilient sectors (e.g., AI infrastructure, ), there may be upside. However, without transparency on leadership or a clear tactical shift, optimism is premature.

Verdict: Re-Evaluate, Don't Abandon

BMSCG isn't a write-off, but it's far from a "buy." The fund's underperformance is a signal, not a death knell. Investors should:
1. Monitor Q4 2025 commentary for signs of strategic recalibration.
2. Demand clarity on portfolio management-specifically, who's calling the shots and their track record in downturns.
3. Reassess fee competitiveness in light of performance. A 1.05% fee is acceptable only if it consistently outperforms; otherwise, it's a drag.

In the meantime, consider hedging small-cap exposure with more defensively positioned funds or ETFs that offer lower fees and clearer alpha pathways. The small-cap growth sector isn't dead, but BMSCG's current trajectory suggests it's time to tread carefully.