Although less liquid and more volatile than small-caps and
mid-caps, Co-CIO Chuck Royce believes that micro-cap is an
evergreen universe that offers many opportunities and greater
return potential.See the Chuck Royce video here.
The micro-cap universe-which we define as companies with market
capitalizations below $750 million-has evolved significantly since
President and Co-CIO Chuck Royce first took notice of the segment
in the late 1980s. As of June 30, 2013, the U.S. micro-cap asset
class consisted of more than 3,170 companies with more than $500
billion in total capitalization.
"We came to the conclusion that the asset class of small-cap was
really a much bigger and broader universe than just a simple one
class setting," says Chuck. "We decided that and we tested this to
see if return patterns were different, and we came to the
conclusion that they absolutely were," he adds.
Beside market cap, there are distinguishable characteristics that
set the asset class apart, including less liquidity and greater
volatility than its small-cap and mid-cap peers. Despite what many
investors might consider as off-putting appearances, we believe
that micro-caps offer greater return potential and present
"We're looking for the sort of least volatile financial
characteristics-very strong, low-leverage characteristics-and we
take advantage of the volatility in the stocks themselves by buying
in a very careful manner," says Chuck about how our investment
process centers around risk management and a long-term approach
that focuses on achieving above-average absolute returns.
Another attractive quality that we see inherent in micro-caps is
the abundance of companies that the universe offers through IPOs,
spinoffs of larger companies, and what Chuck likes to call "fallen
angels," or higher market-cap companies that drop down into the
At Royce, we have a very broad look at micro-cap and have wide
exposure to the asset class both domestically and abroad. While
some of our core offerings-such as Pennsylvania Mutual,Total
Return, and Heritage-have elements of micro-cap in their
portfolios, we also have several dedicated micro-cap products:
Royce Micro-Cap Fund - Managed by Jen Taylor since 2009 (co-manager
2006-2008 and assistant portfolio manager 2004-2005), with
assistants Whitney George since 2009 andBrendan Hartman since 2013.
Royce Micro-Cap Discovery Fund - Managed by George Necakov since
2003 and Jim Harveysince 2010, with assistant
Royce Capital Fund - Micro-Cap Portfolio - Managed by Jen Taylor
since 2010 (co -manager 2009-2010, assistant portfolio manager
2003-2009), with assistants Whitney George since 2010 (manager
2002-2009) and Brendan Hartman since 2013.
Royce Micro-Cap Trust (a closed end fund) - Managed by
since 1993, with assistants Chris Flynn, Jenifer Taylor, and Jim
Harvey since 2009.
Royce International Micro-Cap Fund - Managed by David Nadel since
2010 with assistants Jen Taylor and Jim Harvey since 2010.
Important Disclosure Information
The thoughts and opinions in the video are solely those of the
person speaking as of August 12, 2013 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.
This material is not authorized for distribution unless
preceded or accompanied by a currentprospectus. Please read the
prospectus carefully before investing or sending money.
Micro-cap, small-cap, and mid-cap stocks may involve considerably
more risk than investing in larger-cap stocks (please see "Primary
Risks for Fund Investors" in the prospectus).
Data provided by [i]Reuters
as of 6/30/31
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