“The senior fund manager, 73 years old and regarded as a top small-cap investor, blames the Federal Reserve and its quantitative-easing program for distorting values in the stock market… For New York-based Royce, investing has always been about following a discipline. Those investors so eager to bolt for funds posting better returns should consider whether their new portfolio managers can match Royce’s 30-year record of 11.54% a year as of the end of the first quarter, versus 9.39% for the Russell 2000, or the 11.18% a year he’s managed over the past 10 years through May 8, better than 80% of all small-cap funds… In the short term, Royce hasn’t done as well. For the year through May 8, the fund’s 11.22% gain is worse than 81% of the small-cap funds tracked by Morningstar. Year over year, Royce posted a 19.75% rise, well behind the Russell 2000′s 24.17% gain.”
With that, how does the fund’s performance in the past eight years look from the Alpholio™’s perspective?
The chart reveals two distinct phases in that period:
- From early 2005 through late 2009, the fund largely did not generate any RealAlpha™
- From 2010 onwards, the fund exhibited a negative trend in cumulative RealAlpha™.
In its analysis of the fund titled “Royce’s flagship fund is a contender,” which was published in November 2012, Morningstar states that:
“The past few years have been uninspiring, but Royce Pennsylvania Mutual still has what it takes to succeed in the long term.”
The questions are: How long will the fund take to recover? Will it ever outperform its reference exchange-traded product (ETP) portfolio? The above chart does not offer an encouraging answer to either question.
Disclaimer: Due to a multitude of random factors, perfect prediction of performance of an investment vehicle is nearly impossible. Therefore, the above analysis should be treated as merely one of the many inputs to an investment decision, and not as a definitive recommendation to buy or sell any securities. While Alpholio™ strives to provide original and useful insights into fund and portfolio performance, the ultimate investment decision belongs to you, the investor.
For a detailed explanation of the patent-pending Alpholio™ analysis methodology, please refer to the FAQ.
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