International Premier: How to Uncover Quality in Int'l Small-Caps
article , video 11-13-2017

International Premier: How to Uncover Quality in Int'l Small-Caps

Portfolio Manager David Nadel breaks down the origins of his international small-cap fund, and why the asset class is worth considering now. 


Origins of the International Premier Strategy

Chuck Royce has created a unique culture at this firm where portfolio managers are encouraged to take a lead with creating strategies that they're very excited about, as opposed to the marketing side of a firm taking a lead with those strategies.

In the case of Royce International Premier, it was put together to embody an investment philosophy which I and Mark Rayner had developed over 20 years, which sits in the premier camp of Royce. 

"Chuck Royce has created a unique culture at this firm where portfolio managers are encouraged to take a lead with creating strategies that they're very excited about."

Chuck Royce had a tremendous insight when we were putting together the strategy, which is that small companies can be global leaders, and certainly companies that operate outside the US can be just as good, if not better, than a lot of US companies, and really be global number ones. The mission of Royce International Premier is to invest in the best 50 companies we, or we think anyone, could find anywhere.

The Royce Expertise

The International Premier Fund sits within this kind of premier practice at Royce. So, this is a way of analyzing companies. It's an approach which puts a higher emphasis on business structure, on quality, than necessarily on valuation. At least it doesn’t seek to identify businesses, initially by valuation.

There are also a number of portfolio managers and analysts on the Royce team. There are 20 or so investment professionals. Any of those people, technically, can contribute an idea to this portfolio. So there is a bigger resource that we call on, even though the portfolio essentially is managed just by two people.

What is A Premier Company?

So, to Mark and me, a premier company is a business which generates pretty consistent and fairly predictable cash flow. We like to see that kind of visibility. We like companies that have high portions of recurring revenue. We like businesses that grow a cyclically. We don't want to be in a position of analyzing economic cycles, because we don't think we're any good at it.

And we like businesses that have strong economic moats. You know, benign, competitive environments situations where they can compete in a productive way.

3 Reasons to Consider the International Premier Strategy

First of all, I think they should be looking at the asset class itself. And, you know, this is an asset class which has historically provided outsized, risk adjusted returns. So, I think they should start there. The strategy itself is producing below average volatility relative to the asset class, relative to its peer group. And I think the strategy and the asset class, both provide diversification benefit.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the persons speaking as of October 10, 2017 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. Past performance is no guarantee of future results.

The performance data and trends outlined in this presentation are presented for illustrative purposes only. All performance information is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements.

Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. The Russell 2000 Index 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.

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. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.)



Sign Up