PM Steven McBoyle’s Overview and Outlook for Our Quality Strategy
article , video 02-02-2018

PM Steven McBoyle’s Overview and Outlook for Our Quality Strategy

Portfolio Manager Steven McBoyle on what worked in our quality—or “premier”—strategy in 2017 and what may be in store in 2018.

TELL US
WHAT YOU
THINK

What’s your perspective on Premier’s performance in 2017?

Well, we’re certainly pleased that we had a strong 2017. I think we take solace in the fact that it was predominantly driven by stock selection, which we always like to see. We also really had a decent year in 2016. So you know, the former being a growth led year, with the latter being a value led year. So very, very constructive to see Premier outperform for two years now, both in a value and a growth led market. We have had a lot of gains. So we had the opportunity to harvest those, recycle them, back into again, as we always do, trying to find the next generation, the emerging Premier type companies that we’ve been working on in our pipeline for some time. So we’re finding new names, and we’re having the opportunity to harvest some gains. 

What do you think will surprise investors in 2018?

Allow me to say up front, forecasting surprises is a dangerous sport. As I like to say, he who uses a crystal ball will most certainly eat shattered glass. So now having said that, as I look to 2018, what am I fearful of? I think inflation could surprise to the upside. Again, as we know, risk assets generally don’t see multiple compression until inflation is in and around four percent. So inflation at this point in time looks manageable. But I do question whether we’re stressing the system. And why do I say that? Because as we sit here today, wage rate inflation is apparent. We have a material shortage of skilled labor. We are seeing commodity prices increase. And if you look at the actual underlying ISM operating rates, across the board, very, very strong. So we know that rates and inflation will increase as the economy improves. And that is a productive outcome, constructive particularly for Royce’s overall approach and strategies. But I do fear that we’re underestimating how quickly inflation will rise.

Important Disclosure Information

Average Annual Total Returns as of 12/31/17 (%)

  QTR* YTD 1YR 3YR 5YR 10YR 20YR SINCE
INCEPT.
DATE
Premier 6.24 23.77 23.77 11.11 11.68 8.78 10.96 11.94 12/31/91
Russell 2000 3.34 14.65 14.65 9.96 14.12 8.71 7.89 9.87 N/A
Annual Operating Expenses: 1.16%

*Not Annualized

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.

The thoughts and opinions expressed in the video are solely those of the persons speaking as of January 9, 2018 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.

The performance data and trends outlined in this presentation are presented for illustrative purposes only. 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.  The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests 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 one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.)

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