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Royce Ventures Into Large Caps

Plus, Van Eck launches a commodity fund to fight contango, and more.

Morningstar Analysts, 01/10/2011

Royce, a firm known for its smaller-cap funds, launched its first large-cap offering Jan. 3 along with three new international funds.

The large-cap offering, Royce Special Equity Multi-Cap RSEMX, will be run by Charlie Dreifus as an extension of the strategy he employs at small-cap Royce Special Equity RYSEX. Dreifus, an accounting maven with a keen focus on downside risk, won Morningstar's Domestic-Stock Manager of the Year award in 2008 and was also a finalist for Morningstar's Domestic-Stock Manager of the Decade accolade. He has run Royce Special Equity since 1998 but has honed his small-cap investment approach since the early 1970s.

Dreifus said the new fund will allow him to buy ample bargains in the large-cap space. He has owned more mid-caps in Royce Special Equity in the past year or so, but this will be his first stint running a fund focused on larger-cap stocks, which are heavily followed by Wall Street analysts and professional money managers.

Royce Special Equity Multi-Cap will own 35 to 50 stocks that have at least a $5 billion market capitalization. This fund likely will have the largest market cap of any at the firm. (Royce Mid-Cap's RMIDX market cap recently clocked in at $5.5 billion.)

The other new offerings--Royce Global Dividend Value RGVDX, Royce International Premier RYIPX, and Royce International Micro-Cap ROIMX--also broaden the firm's lineup. Prior to these launches, only four of Royce's 26 funds had international focus. But in recent years, the firm has made a big push to expand its research capabilities in the international small-cap arena, and many of the domestic offerings had relatively large stakes in foreign fare.

Global Dividend Value will be run by David Nadel and Chuck Royce. The managers will normally keep at least 40% of the portfolio invested in international stocks, and dividend-paying firms will soak up at least 80% of its assets.

Nadel, who has been a foreign equity fund manager at the firm for four years, will also be lead manager on International Premier and International Micro-Cap. George Wyper, who joined the firm in 2010 and formerly was head of Wyper Capital Management, will comanage International Premier. Firm veterans Jenifer Taylor and James Harvey will comanage International Micro-Cap. These two funds will devote at least 65% of assets to foreign stocks, but the market-cap ceilings for new stock picks are $2.5 billion for International Premier and $500 million for International Micro-Cap.

Van Eck Launches Second-Generation Commodity Fund
New York-based asset manager Van Eck Global recently launched the index-based Van Eck CM Commodity Index Fund CMCAX. The fund, described by the firm as a "second-generation" commodity fund, is designed to reduce the potential negative effects of contango that can significantly reduce the performance of commodity investments over time. (Contango occurs when the price of a futures contract exceeds the expected spot price when the contract expires.)

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