A small-cap fund finds `sweet spot'

Taking Stock

October 02, 2005|By ANDREW LECKEY

I'm considering purchasing shares of Royce Value Fund. What is your opinion?

K.T., via the Internet

It has a clear strategy that has paid off handsomely for investors since the fund's inception in 2001.

This knowledgeable fund specializing in small-cap stocks owns about 60 stock names, unlike some rivals that have 200 or more. By avoiding the smallest micro-cap stocks and sticking with more established names in the $500 million to $5 billion market-cap range, it is less volatile than most of its peers.

The $76 million Royce Value Fund (RYVFX) rose 24 percent over the past 12 months to rank in the top 15 percent of small growth and value funds. Its three-year annualized return of 37 percent puts it in the top 3 percent of its peers. Royce & Associates of New York manages the fund. Baltimore's Legg Mason Inc. purchased the fund in 2001.

"We think of Royce managers as some of the best in the small-cap business, and since the end of 2003 this fund has been in a sweet spot," observed Todd Trubey, analyst with Morningstar Inc. in Chicago. "While it could be a small-cap anchor for an individual's portfolio, because of market cycles it is unlikely to remain as red-hot as it has been."

Co-managers are Whitney George, a successful manager at other Royce funds, and Jay Kaplan, previously a fund manager at Prudential. With no sector considered off-limits, they've been bullish on energy this year. Since various Royce funds tend to own some of the same stocks, be sure to compare this fund with other Royce holdings to avoid overlap.

This "no-load" (no sales charge) fund requires a $2,000 minimum initial investment and has an annual expense ratio of 1.49 percent.

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