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The three Royce & Associates closed-end funds: The Royce Value Trust (RVT), The Royce Micro-Cap Fund (RM)) and the Royce Focus Fund (FUND) all have posted spectacular (for the time periods) NAV returns since their inception dates.
This is especially impressive since the oldest, RVT, started in November of 1986 and the second oldest, RMT, began operations on December 14, 1993. Royce took over management of the Focus Trust on Nov. 1, 1996.
Here are the outstanding NAV total returns compared with each other and their Russell 2000 benchmark:
Period*
Royce Value Trust
Royce Micro-Cap
Royce Focus Trust
Russell 2000
One-Year
44.59%
46.47%
53.95%
27.17%
Three-Year
-6.18%
-7.01%
-0.34%
-6.07%
Five-Year
1.36%
1.00%
5.44%
0.51%
Ten-Year
7.57%
8.64%
11.72%
3.51%
Fifteen-Year
10.19%
10.56%
N/A
7.73%
Twenty-Year
10.34%
N/A
N/A
8.34%
Since Incept.
10.29%
10.20%
10.82%
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Incept. Date
11/26/86
12/14/93
11/1/96**
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* Data as of Dec. 31, 2009
** Royce & Associates assumed management on 11/1/96
As of last week’s close these fine funds were still available at nice discounts to NAV. The Focus Trust sold for 10.6% below NAV while the Micro-Cap and Value Trust closed on March 13, 2010 at discounts of 15.1% and 15.2% respectively.
Royce specializes in small cap issues with a value orientation. They have far surpassed their Russell 2000 benchmark in virtually all time periods while providing solid absolute returns during one of the worst market environments in history.
While the DJIA and the S&P 500 came in about neutral for the decade ended December 31, 2009 all three of these Royce Funds posted very respectable 7.57% - 11.72% annualized results.
YTD returns for 2010 have been excellent as well.
Closed-end funds offer some huge advantages over traditional open-end mutual funds. When times are frothy they don’t get forced to accept new money that backward-looking investors tend to pour into funds right after big performance has occurred. After huge market sell-offs (like the one in late 2008 through March 9, 2009) closed-end funds were not forced to liquidate holdings to make redemptions by rear-mirror fund holders who decided to bail out when they could no longer take the pain of big paper losses. Lastly, closed-end fund bought at discounts to NAV (as these three are priced presently) give you a leverage dividend yield because you collect 100% of the payouts while needing to lay out only 85% - 90% of the true value of the shares you are buying.
These funds are perfect choices for anyone who desires time-tested, professional management for the small-cap allocation of their overall portfolio mix. How many other mutual funds performed this well during the turbulent period we’ve just concluded?
Disclosure: Author owns all shares in all three of the Royce Funds mentioned here.
Source: Royce Closed-End Funds: Tapping Into Double-Digit Lifetime Returns