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3 / 5 Stars
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Note: Profile written for different share class.
The fund has returned 23.22 percent over the past year, 11.87 percent over the past three years, 18.42 percent over the past five years, and 9.15 percent over the past decade.
|Trailing Returns||Updated 06.30.2014|
|Year to date||1.8%|
|3 Years (Annualized)||11.9%|
|5 Years (Annualized)||18.4%|
|10 Years (Annualized)||9.2%|
The volatile world of small-cap stock funds tends to scare off the risk-averse crowd, who feel much safer holding the tried-and-true stocks that have worked for generations of investors. The Royce Pennsylvania fund, however, has the long-term outlook and management stability that may inure conservative investors to some of those worries.
As of July 03, 2014, the fund has assets totaling almost $6.90 billion invested in 516 different holdings. Its portfolio consists of stock of small and medium-sized companies that are primarily domiciled in the United States
Chuck Royce runs a mixed strategy, using both company-specific and sector earnings prospects to beat the Russell 2000, a small-cap index. “This year the emphasis has been on industrials and catching firms with a global orientation,” says Royce, the longtime portfolio manager. “The dollar has begun to be weaker over the course of a year, and we think that the dollar decline over time will benefit industrial companies.” This strategy helped the fund notch double-digit returns in 2009 and 2010. But that isn’t to say the fund pays much attention to the short-term. It holds the average security for five years. “We have a very long-term orientation,” Royce says. Management also aims for higher-quality stocks, especially those with pristine balance sheets. Management also tends to stick with companies it has tracked for years, rather than newer, less familiar names. Management believes these orientations will provide more stability during market turmoil. The fund has returned 23.22 percent over the past year and 11.87 percent over the past three years.
Royce has given this no-load fund the better part of his life. Since taking over the fund in 1972, Royce has grown its assets to more than $6 billion as of December 2010, which is somewhat large for a small-cap fund. Royce has managed the influx of cash by growing the fund’s holdings to nearly 500 stocks. That diversification might make it look like an index fund, but the fund’s returns have only been within three percentage points of the benchmark twice in the last decade. This might be a factor of the fund favoring more mid-cap stocks in recent years, which made up more than 40 percent of its portfolio as of Sept. 30, 2010. “It’s highly diversified by choice,” Royce says. “It’s designed to capture whatever is going on in the small-cap world and hopefully have less risk attached to it.” The fund has returned 18.42 percent over the past five years and 9.15 percent over the past decade.
The fund aims to provide investors with exposure to small-cap stocks with a moderate risk/reward profile. Chuck Royce says the two most important stock fundamentals for the fund are return on capital and a solid balance sheet. He aims for returns on invested capital of at least 20 percent.
Role in Portfolio
Morningstar calls the fund a “supporting player.”
Chuck Royce, alongside new additions Jay Kaplan and Lauren Romeo, is the backbone of the fund’s portfolio management. He has been with the fund since 1972. All three managers have autonomy in selecting stocks, but Royce points out that three share similar investment orientations. Management has access to an in-house investment staff of nearly 30 professionals.
Royce Pennsylvania Mutual Fund has an expense ratio of 1.25 percent.
The fund may lag peers due to its large and less-versatile asset base