article , video 02-02-2016

A Disciplined Strategy Will Prove Its Merits

Portfolio Manager Charlie Dreifus delves into the details of 2015 performance for Royce Special Equity Fund while discussing the portfolio's disciplined contrarian strategy, one that is bottom-up and fundamental.

TELL US
WHAT YOU
THINK

A Disciplined Strategy Will Prove Its Merits

I want to thank my investors for being patient, and for being understanding.

This is a strange year for me. This is a year that I've never experienced before in my career, in the sense that in a down year, where my fund will be down more than the Index.

In most cases, the fund was actually up in down years, and in the years when I was down, I was down less than the market, on an annual basis.

On a quarterly basis, it happens all the time. That's noise. But on an annual basis, you have to take notice of it.

Special Equity Portfolios 2015 Review

In 2015, the portfolios, were affected by two primary factors. The names I didn't own – the market tended towards growth names, and even within that, a very selected few.

Many people have pointed out that the market has been incredibly narrow. There have been four to ten names in 2015 that gave the entire performance. I didn't own any of those, nor would my approach be consistent with owning those. It's not what I do.

I was also affected by what I did own. I had many retailers, most of whom were still transitioning into greater traction in their e-commerce efforts.

But overall, I'm not doing anything that differently. I'm doing it as I've always done.

I know that what I'm doing makes total economic sense.

If you're in the Mergers and Acquisition business, if you're a CFO, if you're an M&A attorney, what I do makes such basic economic sense.

What we're doing is we're applying the laws of economics, accounting, and capitalism to selection.

You can be out of sync if you have a strategy that is disciplined, but if it's grounded in something that is so basic and fundamental to our system, I'd like to believe, and I do believe, that the value keeps building.

So, I'm confident.

Average Annual Total Returns (%) as of 12/31/15

QTR YTD 1YR 3YR 5YR 10YR 15YR 20YR SINCE
INCEPT.
DATE
Special Equity -0.62 -12.36 -12.36 4.65 5.76 6.91 10.10 N/A 8.38 05/01/98
Russell 2000 3.59 -4.41 -4.41 11.65 9.19 6.80 7.28 8.03 6.33 N/A
Annual Operating Expenses: 1.12%

Important Performance and Expense Information
All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 30 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees and other expenses.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of December 21, 2015 and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money.

The Fund invests primarily in small-cap stocks which may involve considerably more risk than investing in larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.) As of 6/30/15, the Fund invested a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any of these stocks would cause the Fund’s overall value to decline to a greater degree.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell© is a trademark of Russell Investment Group. The Russell 2000 is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 index. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Insights & News

Share:

Subscribe:

Sign Up

Follow: