We are very pleased that Buzz Zaino will once more lead the portfolio management team of Royce Opportunity Fund and our other portfolios that are run with the unique opportunistic value strategy that Buzz first developed. Three other experienced Royce portfolio managers are joining him on the new investment team: James P. Stoeffel and Brendan J. Hartman, who also manage Royce Micro-Cap Fund, and James Harvey, who spent a decade as an analyst with Buzz working on the Opportunity strategy.

How do you feel to be back leading the portfolio management team for the Opportunistic Value Strategy?

My years of experience in this business have taught me that life can take unexpected twists and turns, but I’m very happy to be back. I want to let our investors know—and I would add that I’m a significant investor in this strategy myself—that I’m also deeply committed to keeping the portfolio in good shape. Of course, I’ve been closely involved with the portfolio since I joined Royce in 1998—including the period when I served as Senior Advisor, which ran from October 2018 until April of this year.

Will there be changes to the approach?

The process will remain the same. It’s always been very important to me to maintain the consistency and integrity of the strategy, so the team will be using the same process that’s been in place for decades. We’ll be focusing on companies with low price-to-sales and price-to-book ratios where we’ve identified catalysts for growth. I think one advantage of the strategy is that it’s very straightforward. However, it also requires a considerable amount of research and a lot of discipline. Our goal is to use the process to continue delivering a good long-term performance experience for our investors and clients.

How do you feel about working with Jim Stoeffel, Brendan, and Jim Harvey?

I feel very positive about it. It’s been an easy transition because we’ve all known each other for a long time. All three of them have worked right down the hall from me for the last five years. We’ve been in countless company meetings together. And, of course, Jim Harvey worked with me as an analyst for 10 years.

Our deep bench of investment professionals here at Royce is a very important attribute. So while the approach Jim and Brendan use in Royce Micro-Cap Fund differs from what we’re doing in Opportunity Fund, we all share ample experience analyzing micro-cap stocks from a value perspective. And many micro-caps receive little or no analyst coverage, so they’re also highly experienced doing the sort of in-depth research into companies and industries that this strategy entails. So we know each other as people and as investors, and I’m excited to be working more closely with them.

How do you see the opportunities in today’s market where valuations are high but the economy is recovering?

I think this is both a wonderful and challenging time to be an investor. All of the change and uncertainty that we’ve seen over the last year or so have created considerable shifts at the sector, industry, and company levels. I can understand why some people don’t like this kind of climate—uncertain and/or volatile periods are often difficult for some investors to stomach, but in my experience that’s when I’ve found some of the most rewarding long-term investment opportunities.

What’s your overall outlook for the Strategy?

We’re confident. This is a strategy that has historically done well during periods of economic expansion. Both Fed Chair Powell and Treasury Secretary Yellen have made it very clear that they will keep liquidity high by keeping interest rates low in order to for the economic recovery to keep going strong. So in some ways, the stage is set for the kind of small- and micro-cap companies we like to perform well. Valuations are obviously higher than value investors like us would like to see, however, so a certain degree of economic recovery has been priced into many stocks. It’s our job to select those companies that we see as most likely to continue benefiting from the rebounding economy.

Important Disclosure Information