Moving Forward by Adding Investment Talent—Royce
article 04-29-2022

Moving Forward by Adding Investment Talent

CEO and Co-CIO Chris Clark discusses recent Portfolio Manager elevations and other important changes that became effective with the updated Prospectuses on 5/1/22, as well as new additions to our investment staff.


Can you talk about the Funds’ recent Portfolio Manager elevations?

I’d first highlight the fact that we’re giving greater PM responsibilities to people who have consistently demonstrated their talent and skill as investors. Mark Fischer, who joined Royce in 2020, is being elevated to co-Lead Portfolio Manager on the Royce International Premier Fund with Mark Rayner. Two very gifted analysts, who are also recent hires, work with them on this strategy: Yutetsu Ametani, who came to Royce in 2021, and Evan Choi, who joined us even more recently in April of this year. Mark Fischer has already distinguished himself as a highly knowledgeable and effective portfolio manager, and we think that Yutetsu and Evan complete a very talented and experienced investment team.

Were there any other recent Portfolio Manager elevations?

Yes—we’re very excited that Joseph Hintz, CFA®, is being elevated from Senior Analyst to Assistant Portfolio Manager on Total Return Fund. Joe is also a recent addition to our growing investment staff, having joined us in 2021. He’ll work closely with Miles Lewis, CFA®, Total Return’s lead Portfolio Manager, and Chuck, who remains a Portfolio Manager on the Strategy. Miles and Joe already have a prior professional relationship, having worked for several years together employing a similar strategy at another firm, which is an important advantage. Joe may be new to Royce, but he’s a very talented investment professional and has distinguished himself in his brief tenure in uncovering quality small-cap value companies for the Fund.

Are there other changes to Royce Total Return Fund?

We’ve made some important updates to the Fund’s non-fundamental investment policies contained in the prospectus. Total Return has historically focused its investments primarily in dividend-paying companies. However, dividends are just one of several ways a company can return cash to shareholders. In the nearly 30 years since the Fund’s 1993 launch, many small-cap companies have evolved to return capital to shareholders through share buybacks as an alternative to paying regular dividends. The Total Return team believes that evolving its focus to include both dividend payers and share repurchasers will expand the opportunity set of companies that meet their criteria for investment. Importantly, following this change, the Fund will continue to invest a large percentage of its net assets in dividend-paying stocks but will have the additional latitude to invest in a broader range of companies—while maintaining the lower volatility, quality focus that’s always been a hallmark of the Fund.

What other changes affected the Fund?

We also outlined three categories or themes that the team will use when selecting stocks: “Compounder” companies possess what the team believes are outstanding business models, strong financial characteristics, and above-average growth potential while “Quality Value” companies have attractive profit margins, strong free cash flows, high returns on invested capital, and low leverage that also trade at what Miles, Chuck, and Joe deem to be attractive valuations. Finally, “Special Situations” are companies that may have complex business models and/or require a catalyst for growth, such as spin offs, turnarounds, and/or unrecognized asset values. We think outlining these three areas offer greater visibility on the themes the team uses.

Were there changes to the principal investment strategy for any other Funds?

Yes, we also updated and added to the themes the portfolio management team uses in Royce Pennsylvania Mutual Fund to better reflect how the Fund’s selection process works. We now list four selection criteria in the Fund’s “Principal Investment Strategy” section: “High Quality” companies are those with high returns on invested capital that the team also believes have significant competitive advantages; “Emerging Quality,” which seeks companies that are newer in their lifecycle but that Royce believes can become High Quality businesses in the future; “Traditional Value,” which looks for companies trading at prices below the team’s estimate of their current worth; and “Quality Value,” which seeks companies with attractive profit margins, strong free cash flows, and lower leverage that also trade at what the portfolio manager believe are attractive valuations. Each of Penn’s portfolio managers generally focus on one of these approaches. The two new themes are “Emerging Quality,” where Andrew Palen plays the primary role, and “Quality Value,” which is Miles Lewis’s area of expertise. As has been the case for several years, Chuck’s principle role on the strategy is to collaborate with the each of the portfolio managers across all themes.

Are there any other notable changes to the Funds?

We’re adding “Small-Cap” to the names of Royce Opportunity, Special Equity, and Total Return Funds. We announced this news in the relevant prospectuses dated 5/1/22. These changes will take effect 7/1/22, which gives investors 60 days’ notice of these changes. Our goal in changing these names was to provide investors and clients even greater clarity on the small-cap orientation of each Fund. It’s important to note that these name changes will not have any effect on the Fund’s investment approach. These new names will also result in greater consistency of naming conventions across the Franklin Templeton platform and reaffirm our exclusive focus on the small-cap asset class. Additionally, it will give asset allocators a simpler path to finding and identifying our investment strategies.

Have there been other recent additions to the investment staff?

In addition to Evan Choi, we hired four new investment professionals in 2022: Senior Analyst Ronak Jain, CFA®, who works primarily on the GARP (“Growth at a Reasonable Price”) strategy we used in Royce Smaller-Companies Growth Fund, which Chip Skinner manages; Senior Analyst Zachary Weiss, CFA®, CPA, who works on the firm’s Premier Quality Strategy that we use in Royce Premier Fund with co-Lead Portfolio Managers Lauren Romeo, CFA® and Steven McBoyle, as well as Chuck, who serves as portfolio manager, and Andrew Palen, who serves as assistant portfolio manager; Janet Lewis, CFA®, who works as a research analyst supporting Chuck on his investment activities; and Maureen McCarthy, who is an ESG analyst providing support in this important area of research and risk management across our investment lineup.

We think that hiring and developing investment talent is critical as both our firm and the investment landscape evolve. We have a large and highly experienced team of investment professionals, yet we still recognize the importance of cultivating and recruiting new investment talent—which we see as vital to sustaining superior long-term investment results. As we’ve said before, our approach to the firm’s growth and success is grounded in five key principles: our investment culture, which is of paramount importance; our long-term focus; our thoughtful and methodical approach to all our activities; an ethos of constant improvement in all our activities; and the discipline to always expect surprises—which has been particularly relevant in the current, highly volatile market environment.



Important Disclosure Information

Average Annual Total Returns as of 3/31/22 (%)

  Average Annual Total Returns (%) Annual
Expenses (%)
  QTD 1YR 3YR 5YR 10YR 15YR 20YR 45YR/Since
Date Gross Net
International Premier -13.92 -6.43 7.88 9.80 8.99 N/A N/A 7.52 12/31/10 1.26 1.19
Opportunity -4.71 -0.31 20.95 13.40 12.68 9.16 10.54 12.60 11/19/26 1.23 1.23
Pennsylvania Mutual -9.12 -2.25 12.10 10.62 9.97 7.69 9.10 12.92 n/a 0.95 0.95
Premier -7.32 -0.37 11.63 10.88 9.62 8.85 10.32 11.53 12/31/91 1.12 1.12
Smaller-Companies Growth -16.59 -19.85 12.98 11.09 10.26 6.93 10.26 11.31 06/14/01 1.25 1.24
Special Equity -5.71 2.01 9.08 6.39 7.91 7.55 8.43 8.76 05/1/98 1.23 1.23
Total Return -2.51 4.71 12.12 8.87 9.95 7.46 8.58 10.55 12/15/93 1.25 1.25
Russell 2000 -7.53 -5.79 11.74 9.74 11.04 7.99 8.72 N/A N/A N/A N/A
Russell 2000 Value -2.40 3.32 12.73 8.57 10.54 6.91 8.55 N/A N/A N/A N/A
Russell 2000 Growth -12.63 -14.33 9.88 10.33 11.21 8.81 8.57 N/A N/A N/A N/A
MSCI ACWI ex USA Small Cap -6.52 0.03 10.22 7.89 7.28 N/A N/A N/A N/A N/A N/A

1For Royce Pennsylvania Mutual Fund, the average annual total return shown is for the 45-year period ended 3/31/21.

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 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 Class shares redeemed within 30 days of purchase may be subject to a 1% redemption fee payable to the Fund (2% for Royce International Premier Fund). Redemption fees are not reflected in the performance shown above; if they were, performance would be lower. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at All performance and expense information reflects results of each Funds’ Investment share Class. Price and total return information is based on net asset values calculated for shareholder transactions. 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 Fund’s most current prospectus. Royce & Associates has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Royce International Premier Fund Investment Class’s net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.19% through April 30, 2022. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds, hedge funds, private equity funds, and other investment companies.
Service Class shares bear an annual distribution expense that is not borne by the Funds’ Investment Class. If such distribution expenses had been reflected for Funds showing Investment Class performance, returns would have been lower. Investments in securities of micro-cap, small-cap, and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see “Primary Risks for Fund Investors” in the prospectus.) Certain Funds invest a significant portion of their respective assets in foreign companies that may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic, or other developments that are unique to a particular country or region. (Please see “Investing in Foreign Securities” in the prospectus.) Therefore, the prices of securities of foreign companies in particular countries or regions may, at times, move in a different direction than those of securities of U.S. companies. (Please see “Primary Risk of Fund Investors” in the prospectus.) Certain Funds generally invest a significant portion of their 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 of these stocks would cause their overall value to decline to a greater degree. A broadly diversified portfolio, however, does not ensure a profit or guarantee against loss.

Mr. Clark’s thoughts and opinions concerning the stock market are solely their own and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

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. All indexes referenced are unmanaged and capitalization-weighted. 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 Russell Microcap Index includes 1,000 of the smallest securities in the small-cap Russell 2000 Index along with the next smallest eligible securities as determined by Russell. The Russell 2000 Value Index consists of the respective value stocks within the Russell 2000 as determined by Russell Investments. The Russell 2500 is an unmanaged, capitalization-weighted index of the 2,500 smallest publicly traded U.S. companies in the Russell 3000 index. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. The MSCI ACWI ex USA Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks, excluding the United States. Index returns include net reinvested dividends and/or interest income. 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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