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What led to Premier's outperformance during the first half?
Well, Premier is, for me, the intersection of very high-quality with value. We're going to straddle both ends of that conversation. These are our highest conviction stocks, very high quality. We're thrilled with the outcome, but these outcomes take time. We had a lousy period in the '14-'15 timeframe, and in many ways that's part of the process. So this slightly better period is, I see it as part of the process.
It is a better period for active manager, we are certainly an active manager, higher volatility, lower overall returns and, and somewhat higher rates. I think it's a very good period for active management. You're getting the wide spread of returns in any given area.
What led you to raise your cash levels in 2Q19?
I would not interpret it as a macro call. We do not, I do not, make macro bets in the portfolios. When we get to declines over 15%, I am very intentional about investing the money. And in that case, we invested largely in our existing positions, and I felt good about it.
So this is a sort of unwinding of that. We've had some spikes in certain stocks where we do think tactically with our portfolios, so within the broader, long-term investing style, we're always thinking tactically. And in this case, we're taking advantage of 30%-40% moves of individual stocks.
Percentage of Cash in Royce Premier Fund
Where are you finding opportunities?
We're going off center, where things aren't working precisely in the way people like in the energy area and in the agriculture area. Those are very, very big zones, and we've found opportunity in both.
Can you discuss two financial holdings?
Ares (NYSE:ARES) and Ashmore (LSE:AGOL) come to mind. They are specialty managers, in a way, like we are. We're a specialty manager in the small-cap space. So we think those are advantaged, and in both cases we've been involved with them for multiple years, but they're having a better recognition moment. Ares, Ashmore were long-term bets that they would be regarded over time in a highly favorable way for their superior performance and superior market share.
Important Disclosure Information
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 that 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. Shares redeemed within 30 days of purchase may be subject to a 1% redemption fee, payable to the Fund which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.roycefunds.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees and other expenses.
The thoughts and opinions expressed in the video are solely those of the persons speaking as of July 10, 2019 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.
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.
This article first appeared on GuruFocus.
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