Archived Material: Important Performance Information

Archived material may contain dated performance, risk and other information; please view returns as of the most recent quarter end and month end. Due to changing circumstances over time, statements made in archived material may or may not have continued applicability or relevance in today's environment. Any thoughts concerning market movements and future prospects for small-company stocks are solely those of Royce & Associates, LLC, and, of course, there can be no assurance with regard to future market movements. Small- and micro-cap stocks may involve considerably more risk than larger-cap stocks.

All performance information reflects past performance, is presented on a total return basis and reflects reinvestment of distributions. Current performance may be higher or lower than performance quoted. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that shares may be worth more or less than their original cost when redeemed. Please read the fund's prospectus carefully and consider a fund's investment goals, risks, fees and expenses before investing or sending money. The prospectus contains this and other information. The Russell 2000, Russell 2000 Value, Russell 2000 Growth, S&P 500, S&P 600, NASDAQ Composite and DJIA are unmanaged indexes of domestic common stocks. Distributor: Royce Fund Services, Inc.

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    1. About Royce
      Take Me to . . .
      • Prices & Performance
      • Fund Guide

    2. Our Investment Approach

      At Royce & Associates, small company investing is our core business. We devote our time and resources to it, which distinguishes us from most other asset management firms with broad product offerings. We follow a disciplined value approach and strive to build portfolios that provide investors with solid absolute performance with a focus on reducing volatility.

      We invest in smaller companies, primarily those with market capitalizations up to $5 billion, although some of our Funds may invest in companies with market capitalizations up to $15 billion.  The value approaches that our portfolio managers use share one significant trait: We are looking for what we believe are attractive opportunities trading for less than our estimate of their worth as businesses—their enterprise value.

      We base our assessment of a company’s enterprise value on either what we believe a knowledgeable buyer might pay to acquire the company or what we think the value of the company should be in the stock market.

      Our value approaches focus on:

      • Understanding a company's enterprise value

      • Seeking the right mix of financial characteristics versus stock price 

      • Finding valuation discrepancies, not just statistically inexpensive stocks

      Investment Universe

      Our universe consists of three markets: micro-cap, small-cap and mid-cap companies. The Funds may also invest in foreign securities to varying degrees.

      U.S. Micro-Cap Market Caps up to $500 million
      • More than 3,000 companies
      • More than $300 billion in total capitalization
      • This area offers many choices, but also features limited trading volumes and higher volatility.
      U.S. Small-Cap Market Caps between $500 million and $2.5 billion
      • More than 1,100 companies
      • More than $1.3 trillion in total capitalization
      • This segment is more efficient, offering greater trading volumes and narrower bid/ask spreads.
      U.S. Mid-Cap Market Caps between $2.5 billion and $15 billion
      • More than 700 companies
      • More than $4.4 trillion in total capitalization
      • Mid-cap companies generally possess more established businesses that attract greater institutional interest and thus enjoy greater liquidity.
      Foreign Securities

      This market consists of more than 15,900 companies in developed countries. (Source: FactSet)

      Portfolio Approach

      Funds are diversified according to our view of the attendant risks within each portfolio’s investment universe and approach. A Fund investing primarily in micro-caps, for example, generally holds relatively smaller positions in a larger number of securities, while a small- and/or mid-cap oriented fund may hold larger positions in a relatively limited number of securities.

      Diversified

      A diversified portfolio at Royce is one that generally holds more than 100 securities and whose top positions generally do not exceed 2% of net assets.

      Limited

      A limited portfolio at Royce is one that either (i) generally invests in no more than 100 companies, and whose top positions generally exceed 2% of net assets, or (ii) invests primarily in a single sector.

      Bottom-up Stock Selection Approach

      We employ a bottom-up approach to choosing portfolio holdings, one that focuses on individual stock selection. Our goal is primarily to identify promising companies that have the following characteristics:

      • Strong balance sheets

      • High internal rates of return

      • Ability to generate free cash flow

      We like our companies to demonstrate strong historical track records as businesses and to show potential for successful futures. Interviews with senior management aid us in making these assessments, as do interviews with customers, suppliers and competitors.

      Buy/Sell Discipline

      Generally, we seek to purchase companies trading at discounts of at least 30% and preferably 50% to our estimate of their value as businesses. We will generally sell a position when the company reaches our estimate of its value.

      • We are price-driven, not position-driven

      • We generally set buy and sell targets for positions

      • Cash is a byproduct of our investment process

      Time-Tested Managers of Risk with a Long-Term Orientation

      Our value investing approach employs a rational decision-making process that strives to compound wealth while reducing risk over the long term. From our experience, paying attention to risk does not diminish long-term returns.

      Our basic belief is that the price one pays for an investment makes a significant difference in the long-term returns that an investor receives. As value investors, we take a contrary view to the often emotional process of buying and selling stocks. We seek to reduce risk at times when others are ignoring it and to pursue risk opportunities at times when others may avoid them in an attempt to capitalize on valuation discrepancies.

      It's important for us to attempt to select companies that provide a "margin of safety." In other words, we assess how much risk we are taking in order to achieve our desired reward. Our methods concentrate on managing risk in three ways:

      Business Risk

      To reduce business risk, we generally look for companies that have strong balance sheets, high internal rates of return and excess cash flow. Our estimate of a company's ability to withstand economic adversity is a significant measure of its financial good health. We want to know what the potential risk is of "permanent capital impairment," i.e., the likelihood of a business not being able to generate sustainable returns on assets or, even worse, becoming insolvent.

      Valuation Risk

      We attempt to reduce valuation (or price) risk by buying stocks that are trading at what we believe are bargain prices. The price we pay for a company must be significantly lower than our estimate of its current worth.

      Portfolio Risk

      We seek to reduce portfolio risk by owning a wide variety of stocks, across many sectors and industries.

      Please Note

      There can be no assurance that Royce's small-cap value approach will be successful in achieving its goals. The Royce Funds invest primarily in securities of small-cap and/or micro-cap companies, which may involve considerably more risk than investments in securities of large-cap companies (see "Primary Risks for Fund Investors" in the prospectus). Please read the prospectus carefully before investing or sending money. Distributor: Royce Fund Services, Inc.

  • © Royce & Associates, LLC, 745 Fifth Avenue, New York, NY 10151, (800) 221-4268. All rights reserved. Distributor of The Royce Fund and Royce Capital Fund: Royce Fund Services, Inc., a wholly owned subsidiary of Royce & Associates. The Royce Funds are offered and sold only to persons residing in the United States and are offered by prospectus only. The prospectuses include investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. View our Policies & Procedures, including, among others, our Sarbanes-Oxley Code of Ethics, Privacy Policy and Proxy Voting Guidelines and Procedures.