Royce Premier Fund: What a Change in the Market Might Mean | Royce
article , video 06-08-2018

Royce Premier Fund: What a Change in the Market Might Mean

Senior Investment Strategist Steve Lipper looks at the historical performance patterns for our Premier Quality strategy.


How has Royce’s Premier Quality Strategy performed historically?

Royce Premier Fund, our high-quality strategy, has delivered an impressively consistent history of outperformance. Beating its benchmark nearly two-thirds of the time, and by between 200 and 300 basis points.

Consistent History of Outperformance
5-Year Monthly Rolling Average Annual Return Periods From Premier’s Inception 12/31/91 – 3/31/18

rpr-rolling-5yr.png    rpr-rolling-5yr-bar

1 Average of 5-Year monthly rolling average annual total returns over the specified periods.

What is Premier’s track record in value-led markets?

This is a subtlety that perhaps surprises some people. When we think about all the strategies at Royce, about the value and quality axis, this strategy sits at the highest quality part. And so people might say: Is it really a value strategy? And we think the relative return profile helps to address that.

Greater Outperformance in Value-Led Periods
From Premier’s Inception 12/31/91 – 3/31/18

rpr-all-periods    rpr-value-led-periods

1 Value-led periods when the Russell 2000 Value Index outperformed the Russell 2000 Growth Index on a 5-year monthly rolling basis.

It even has greater outperformance in value-led periods—over 80% of the rolling five-year periods during its entire history. Why is that relevant now? Well, our expectation is that leadership is shifting towards a value-led environment.

How has Premier performed in low-return periods?

Another shift in market condition which has historically been favorable for outperformance of the Royce Premier Fund is lower overall market returns.

Premier Historically Outperformed Most in Single Digit Market Environments
Monthly Rolling Five-Year Average Annual Total Returns: Premier minus Russell 2000


Specifically, when five-year periods are single-digit returns, anywhere between zero and ten percent, those have been the biggest spread outperformance that Premier has had, and that outperformance has often been 400 to 500 basis points over a five-year period.

Why would increasing volatility be potentially relevant to Premier’s results?

The third shift in the market environment that we think may be very supportive for Premier is increase in volatility. So if you look at different volatility regimes, really levels of volatility, from very low to below average, average, above average, and high, Premier’s best outperformance comes in either average or above- average periods.

Higher Batting Average in Higher Volatility Periods
Batting Average for 5-Year Monthly Rolling Periods by Standard Deviation Range from 12/31/91 – 3/31/18


Standard deviation is a statistical measure within which a fund’s total returns have varied over time. The greater the standard deviation, the greater a fund’s volatility.

We’ve just been through among the lowest five-year volatilities that we’ve ever seen. Now, Premier still put up respectable numbers over the last five years, compared to the index. Well, if we’re headed to higher volatility, historically that's been wind at the back of Premier’s relative performance.

Our expectations here at Royce are, as the market is shifting in a number of meaningful ways, that we’re headed to a value-led, probably single-digit and higher volatility environment over the next number of years. All three of those factors have been positive, and that could be a very attractive environment for Premier.

Important Disclosure Information

Average Annual Total Returns as of 3/31/18 (%) 

Premier 1.14 17.32 10.57 10.49 9.19 12.66 10.51 11.86 12/31/91
Russell 2000 -0.08 11.79 8.39 11.47 9.84 11.50 7.37 9.77 N/A

Annual Operating Expenses: 1.16% 

1 Not annualized.

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 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 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.)

The thoughts and opinions expressed in the video are solely those of the persons speaking as of April 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. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus .)



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