Annual Royce Investment Partners Firm Update—Royce
article , video 03-03-2020

Annual Royce Investment Partners Firm Update

CEO and Co-CIO Chris Clark updates shareholders and clients on new developments at our firm.

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The following is a modified version of the discussion featured in the video.

New Decade, New Brand

In December 2019 we announced that we were rebranding as Royce Investment Partners. This decision marked the culmination of five years of work to reposition the firm for the best investment outcomes and client experience for our constituents.

Our firm has changed dramatically over this period in terms of our fund lineup, the number of vehicles we offer, and our corporate structure. Equally important, we wanted our new brand to underscore the ethos of partnership that has defined our firm over the 45 years of its existence. Partnership, both internally and externally, is a key attribute of our success.

We spent a great deal of time working to develop a product lineup that suits the ever-shifting needs of the investment management marketplace. We rationalized our mutual fund lineup and expanded the number of other vehicles, making our offerings easier to distinguish for different clients in different distribution channels.

New Offerings

Our constituents’ needs have changed, and we’ve changed with them. We’ve expanded our offerings to include collective investment trusts (CITs), separately managed accounts for institutions, brokerage-sponsored SMAs, and sub-advisory accounts.

We think that our high-quality small-cap approach, most familiar in Royce Premier Fund, is very well suited for the SMA marketplace because of its concentrated portfolio and long-term orientation. For taxable investors, we think offering Premier through an SMA makes sense. We also suspect that a dividend-paying strategy—such as we use in Royce Total Return—would work well in this setting—and so we plan to offer that strategy for SMA clients as well.

Collective investment trusts for these and our other major investment strategies—Pennsylvania Mutual, Special Equity Fund, and Opportunity—are equally appropriate for the retirement-plan channel. We have existing CITs in our dividend-paying (Total Return) and deep value (Opportunity) strategies—and we also plan to offer them in our other major strategies.

Strengthening Our Investment Team

In an asset management world that has become bifurcated between active and passive approaches, we have put a stake in the ground for highly active, fundamentally based investment management rooted in the conviction that our asset class is best suited to it. Critical to this effort is the quality of our investment team, which we believe is one of the deepest and strongest in the small-cap asset class.

In order to sustain this commitment, we recognize the importance of building and investing in our team—it’s the lifeblood of our organization. In the last year, we’ve made several additions, both to our fundamental research team for our major strategies and in our Quantitative Strategies Group, which is becoming an increasingly important part of how we think about our work.

Small-Cap Experts, Advocates, and Guides

As small-cap specialists for more than four decades, we’re uniquely positioned to provide insights on this asset class—and have a rich history of doing so. We’ve always seen an important part of our mission as being passionate advocates for, and intelligent guides to, the world of small-cap investing.

We’re committed to continuing to provide thoughtful and timely market commentary infused with the unique perspectives we’ve developed as notably experienced small-cap investment specialists.

In addition, we’ve published what we think are two especially compelling research papers. The first is an in-depth case for allocating to international small-cap stocks—an underinvested asset class with historically strong fundamentals. The second comes details how we uncovered a striking connection between value-led markets and the success of active small-cap management.

Our clients can look forward to more innovative research about small-caps in the months ahead.

More Small-Cap Perspectives

 

Important Disclosure Information

Average Annual Total Returns as of 12/31/19 (%) 

 Fund 4Q191 1YR 3YR 5YR 10YR 15YR 20YR SINCE INCEPT. DATE
Opportunity 9.93 28.21 7.02 11.09 7.77 10.43 11.68 11/19/96 1.20
Special Equity 7.63 12.63 4.88 8.56 7.09 10.32 8.62 5/1/98 1.18
Total Return 6.81 23.45 7.09 7.49 10.36 7.49 9.45 10.48 1.20
Pennsynvania Mutual 8.74 26.56 8.28 10.52 8.08 10.12 15.37 N/A 0.92
Premier 8.54 34.13 10.52 11.30 9.69 11.01 11.77 12/31/19  1.17
Russell 2000 9.94 25.52 8.59 8.23 11.83 7.92 7.59 N/A N/A
Russell 2000 Value 8.49 22.39 4.77 6.99 10.56 6.92 9.41 N/A N/A

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. Investment and Service Class shares redeemed within 30 days of purchase may be subject to a 1% redemption fee payable to the Fund. Redemption fees are not reflected in the performance shown above; if such fees were reflected, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. All performance and expense information reflect results of the Fund’s Investment Class shares. Gross annual operating expenses reflect the Fund’s gross total annual operating expenses and include management fees, any 12b-1 distribution and service fees, other expenses, and any applicable acquired fund fees and expenses. Net annual operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the most current prospectus. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by any applicable Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies. Service, Consultant, and R Class shares bear an annual distribution expense that is not borne by each Fund’s Investment Class. The Royce Funds invest primarily in securities of micro-cap, small-cap, and/or mid-cap companies, which may involve considerably more risk than investments in securities of larger-cap companies (see “Primary Risks for Fund Investors” in the respective prospectus). The Funds may also invest to varying degrees in foreign securities, which may involve political, economic, currency, and other risks not encountered in U.S. investments.

The thoughts and opinions expressed in the video are solely those of the persons speaking as of January 13, 2020 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.

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. All indexes referenced are unmanaged and capitalization-weighted. The Russell 2000 Index is an index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 2000 Value and Growth indexes consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. 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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