Royce Premier Portfolios seek long-term capital appreciation by investing in what Royce considers to be “premier” small-cap companies — those with market caps that are less than the largest stock in the Russell 2000® Index and exhibit what Royce believes are discernible competitive advantages, high returns on capital, and a sustainable, moat-like franchise.1
Seeks long-term capital appreciation
Royce Premier Portfolios focus on:
- Leading companies with a consistent history of superior profitability
- Moat-like franchises with sustainable competitive advantages
- Quality businesses that can generate excess cash flow with favorable prospects
- Stocks selling at valuations that we believe do not fully reflect their business prospects
- Managed with a consistent investment discipline since 1991.
- Focuses on leading quality companies with favorable prospects that are selling at attractive valuations.
- Managed by a small-cap specialist.
Diversification does not guarantee a profit or protect against a loss.
1 A “moat-like franchise” refers to a company with significant competitive advantages (EG, barriers to entry, ability to set prices, etc.) that enable them to potentially generate superior returns over the long terms.
True bottom-up investment process using comprehensive fundamental analysis, with three primary emphases:
- Sustainable Franchises. Focus on companies with durable competitive advantages operating in favorable industry ecosystem.
- Strong Capital Allocators. Focus on company management with disciplined capital allocation history.
- Attractive Reinvestment Prospects. Focus on companies with opportunities to reinvest with solid returns.
The managers carefully consider sector concentration, diversification, position sizing, and cash holdings in constructing the portfolio.
- Sectors. No more than 40% in one sector to avoid concentration risk.
- Diversification. Generally allocates among 50-70 holdings.
- Positions. Individual positions typically do not exceed 4% of net assets.
- The managers will reduce positions if the manager identifies better risk/reward potential or if they determine business momentum is decelerating.
- The managers will exit a position if they lose confidence in the business model or if the company is acquired.
The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. There is no guarantee investment objectives will be achieved.
meet your managers
Royce Investment Partners specializes in small-cap investing, managing both U.S. and international portfolios for individual investors, financial advisors, and institutions. The firm is generally regarded as a pioneer in small-cap investing. Focusing on this distinctive asset class for more than 45 years has given Royce an unparalleled domain knowledge of the small-company investment universe.
Meet Your Managers
Chairman, Portfolio Manager
Lauren A. Romeo, CFA
What I Should Know
All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met. Investments may be made in small-cap companies, which involve a higher degree of risk and volatility than investments in large-cap companies. The Portfolio generally invest a significant portion of its 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 one of these stocks would cause the Portfolio's overall value to decline to a greater degree. Investments may be concentrated in a limited number of industries and issuers. Equity securities are subject to price fluctuation and possible loss of principal. Certain securities are subject to illiquidity risk, which is the risk that securities may be difficult to sell at certain prices when no market participants are willing to purchase the securities at such prices. The managers’ investment style may become out of favor and/or the manager’s selection process may prove incorrect, which may have a negative impact on strategy performance.
IMPORTANT INFORMATION: Past performance is no guarantee of future results. Management and performance of individual accounts may vary for reasons that include the existence of different implementation practices and model requirements in different investment programs.
Pure Gross performance shown does not reflect the deduction of investment management fees and certain transaction costs, which will reduce portfolio performance. Net performance includes the deduction of a 3% annual wrap fee for equity and balanced portfolios and a 1.5% annual wrap fee for fixed income portfolios. These deducted fees amounts are the maximum anticipated wrap fees. Actual fees may vary. For fee schedules, contact your financial professional or, if you enter into an agreement directly with Legg Mason Private Portfolio Group, LLC ("LMPPG"), refer to LMPPG's Form ADV disclosure document. Returns reflect the reinvestment of dividends and other earnings.
An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.
Please see GIPS® endnotes for important additional information regarding the portfolio performance shown and for effects of fees.
Performance Source: Legg Mason
Hypothetical growth of dollars: For illustrative purposes only. Assumes no withdrawals or contributions. The performance results shown were calculated assuming reinvestment of dividends and income and take into account both realized and unrealized capital gains and losses.
Important Performance Calculation
Performance for the Royce Small-Cap Premier Quality SMA Strategy is represented by the Royce Small-Cap Premier Quality SMA Composite performance. Prior to April 1, 2018, the composite included non-wrap accounts. Beginning April 1, 2018 (inception of the first SMA/wrap account), the composite only includes wrap accounts. Prior to January 1, 2008, performance results were calculated using the gross performance of Investment Class shares of a 1940-Act Fund. The gross performance of the Fund is unaudited, presumes reinvestment of distributions and excludes investor-specific sales. The net-of-fees performance for the Royce Small-Cap Premier Quality SMA Strategy would be lower than the gross performance of the Fund. Royce follows substantially the same investment philosophy, strategies and processes in managing the Royce Small-Cap Premier Quality SMA as it does in managing the 1940-Act Fund. Unlike the Fund, however, the SMA does not invest in non-U.S. Securities. The performance of the SMA will vary from the performance of the Fund because the SMA does not invest in any non-U.S. Securities, and due to differences in cash flows and other factors. Past performance does not guarantee future results.
All net-of-fees 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. Net-of-fees performance for the Royce Small-Cap Premier Quality SMA Strategy is represented by the Royce Small-Cap Premier Quality SMA Composite net-of-fees performance. Net-of-fee composite returns are calculated by reducing each monthly composite pure gross rate of return by the highest wrap fee charged (3.00%) annually, prorated to a monthly ratio. The wrap fee includes transaction costs, investment management, custodial, and other administrative fees. Actual investment advisory fees incurred by clients are negotiable and may vary. Prior to April 1, 2018, the composite included non-wrap accounts. Beginning April 1, 2018 (inception of the first SMA/wrap account), the composite only includes wrap accounts. Prior to January 1, 2008, net-of-fees performance is calculated by deducting the anticipated maximum annual bundled fee of 3.00% from the gross performance of Investment Class shares of a 1940-Act Fund. Past performance does not guarantee future results.
IMPORTANT INFORMATION: Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment adviser. Client portfolios are managed based on investment instructions or advice provided by one or more of the following Franklin Resources, Inc affiliated sub-advisers: Royce Investment Partners. Management is implemented by LMPPG, the designated sub-adviser or, in the case of certain programs, the program sponsor or its designee.
Professional money management may not be suitable for all investors. Factual information relating to the securities discussed was obtained from sources believed to be reliable, but there can be no guarantee as to its accuracy. It should not be assumed that investments made in the future will be profitable or will equal the performance of the securities discussed in the material.
Holdings, sector weightings, market capitalization and portfolio characteristics are subject to change at any time and are based on a representative portfolio. Holdings, sector weightings, market capitalization and portfolio characteristics of individual client portfolios in the program may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities and sectors listed.
Firm Assets (USD) (Billions)
|Composite Assets (USD) (Thousands)||Number of Accounts||Annual Performance Gross*||Annual Performance Net||Russell
2000 Index Benchmark
3 Yr Std Dev
|Russell 2000 Index Benchmark 3 Yr Std Dev
N/A¹ - The three-year annualized standard deviation measures the variability of the returns over the preceding 36-month period. The three-year annualized standard deviation is not presented for periods before 36 months of data is available.
N/A² - Composite dispersion is not presented for periods with five or fewer portfolios in the composite for the entire year.
† For periods since April 1, 2018, this is provided as supplemental information as returns are Pure Gross and have not been reduced by transaction costs.
Royce Small-Cap Premier Quality SMA Composite: The composite definition is as follows for the periods since April 1, 2018: The Royce Small-Cap Premier Quality SMA Composite contains accounts with net-of-fee returns that have been reduced by a wrap fee and invest primarily in small-cap stocks with market caps up to $3.0 billion. Portfolios generally hold less than 80 stocks and invest exclusively in U.S. equities. The strategy follows a high-quality core approach that invests primarily in what Royce believes are “premier” small-cap companies with discernible competitive advantages, high returns on capital, and a sustainable, moat-like franchise. The strategy intends to focus on leading quality companies, those with low debt, the ability to generate excess cash flow, and attractive prospects that are selling at prices Royce believes do not fully reflect these attributes. For the periods prior to April 1, 2018, the composite definition was the following: The Royce Small-Cap Quality SMA Composite contains portfolios that invest primarily in small-cap stocks with market caps up to $3.0 billion, at the time of purchase. Portfolios generally hold less than 80 stocks and invest primarily in U.S. equities but may invest up to 25% in non-U.S. equities. The strategy follows a high-quality core approach that invests primarily in what Royce believes are “premier” small-cap companies with discernible competitive advantages, high returns on capital, and a sustainable, moat-like franchise. The strategy intends to focus on leading quality companies, those with low debt, the ability to generate excess cash flow, and attractive prospects that are selling at prices Royce believes do not fully reflect these attributes. The composite is compared against the Russell 2000 Index. The Russell 2000 index is an index measuring the performance of approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Royce Small-Cap Premier Quality SMA Composite was created October 2018. Prior to January 2020 the composite was named Royce Small-Cap Quality SMA Composite. The name was changed to better reflect the strategy.
For the purpose of complying with the GIPS standards, the Firm is defined as Royce & Associates, LP, which primarily conducts its business under the name Royce Investment Partners. Royce is registered with the U.S. Securities and Exchange Commission (the “SEC”) as an investment adviser (SEC File No. 801-8268). Royce has been investing in smaller-company securities with a value approach for more than 40 years. Royce & Associates, LP began primarily conducting its business under the name Royce Investment Partners effective December 16, 2019. The firm’s full list of composite descriptions is available upon request.
Royce claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Royce has been independently verified for the periods January 1, 2008 through December 31, 2019.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Royce's Small-Cap Premier Quality SMA composite has been examined for the periods April 1, 2018 to December 31, 2019. The verification and performance reports are available upon request.
Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Past performance is not indicative of future results.
The U.S. Dollar is the currency used to express performance. For periods since April 1, 2018, returns are presented gross and net of the full wrap fee and include the reinvestment of all income. For periods prior to April 1, 2018, gross returns are reduced by transaction costs and net returns are reduced by transaction costs and the full wrap fee. The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.
The fee schedule currently in effect is 3.00% on all assets. Wrap fee accounts make up 100% of this composite for periods beginning April 1st, 2018. The wrap fee includes transaction costs, investment management, custodial, and other administrative fees. Net-of-fee composite returns are calculated by reducing each monthly composite pure gross rate of return by the highest wrap fee charged (3.00%) annually, prorated to a monthly ratio. The wrap fee includes transaction costs, investment management, custodial, and other administrative fees. Actual investment advisory fees incurred by clients are negotiable and may vary.
All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision.
Certain SMA products may not be available at all firms.