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Fund Times: Royce Reopens Small-Cap Funds

Plus, changes at Fidelity, Pax World, Osterweis, and more.

Morningstar Analysts, 01/21/2008

A slew of small-cap funds have reopened in recent weeks, as many shareholders have headed for the exits and managers are spying investment opportunities in a turbulent market. Royce joined the fray this week, opening small-cap focused Royce Low-Priced Stock RYLPX and Royce Micro-Cap RYOTX, both managed by veteran Whitney George, to new investors. Royce Opportunity RYOFX, a micro-cap fund run by Buzz Zaino, also reopened after closing in May 2007. The only fund to remain closed in the Royce lineup is mid-blend Royce Premier RYPRX, also run by George, which closed two years ago.

Changes are in store for several of Royce's younger offerings. The firm announced plans to revamp two of the firm's one-year-old international funds. On Feb. 15, Royce International Value RIVFX will be renamed Royce Global Value and adopt a wider-ranging mandate, while Royce International Smaller-Companies RISCX will become Royce European Smaller Companies to reflect the fund's narrowing universe. Also in February, the firm plans to tweak the newly launched Royce Mid-Cap Value RMVSX and Royce Mid-Cap Select RMISX to include smaller companies under the names Smid-Cap Value and Smid-Cap Select.

Fideilty News, Big and Small
The big news out of Boston this week was the reopening of Fidelity Magellan FMAGX, the 45-year-old fund that renowned investor Peter Lynch made famous in the 1980s. The fund, which has been closed for the past 10 years, has been managed by Harry Lange since Oct. 31, 2005, and achieved an impressive 18.8% gain for shareholders in 2007. Our Fidelity expert, Dan Lefkovitz, wrote about the opening here.

In a less monumental development, Fidelity said Brian Younger has left the firm. Younger had managed a variety of sector funds during his career at Fidelity, including a five-year stint on Fidelity Select Telecommunications FSTCX. He joined his latest charge, Fidelity Advisor Financial Services FAFDX, in February, which his comanager Richard Manuel will now run. Fidelity hired Manuel, an experienced financial stock analyst, in 2006 to bolster its financials team, a move coinciding with the firm's push to put experienced analysts in charge of certain sector-specific funds. Because we view this effort favorably, we're less concerned about Younger's departure than we would be about Manuel's.

Women's Equity Pioneer Remembered
The world of socially responsible investing lost an influential visionary late last year. Linda Pei, founder of the Pax World Women's Equity PXWEX, died from cancer Dec. 27. Pei launched Women's Equity in 1993 to invest in companies committed to promoting diversity through the equitable treatment of women; her theory was that such companies would generate superior performance over the long haul. Socially responsible investing firm Pax World Management recently purchased the Women's Equity fund and still follows Pei's screens. It invests in firms that promote women to top executive and director positions, demonstrate commitment to training and developing women employees, and promote work/life balance, among other criteria. The fund is now managed by Sujatha Avutu, who previously ran Evergreen Equity Income ETRAX for six years.PAGEBREAK

Pax World also announced plans to launch three new funds in 2008. Pax World Small Cap will invest in smaller companies across the value-growth spectrum, including as much as 45% of the fund in non-U.S. stocks. Former Citizens Funds manager Nathan Moser will run the fund. Moser spent five years as an analyst and manager at Citizens, which was recently purchased by Sentinel Investments. His most recent assignment was comanager of Citizens Small Cap Core Growth CSCSX.

The firm also will launch the multicap Pax World International and the environmentally conscious Pax World Global Green. Ivka Kalus-Bystricky, formerly of State Street Global Advisors, will run the international fund. The green fund will be run in tandem by Bruce Jenkyn-Jones and Ian Simm. The proposed expense ratios of 1.45%, 1.5%, and 1.55%, respectively, are all high.

Osterweis Bolsters Equity Team
OSTFX has added a fifth member to the stock fund's management team. Greg Hermanski, who has worked as a convertible and high-yield bond analyst for Osterweis Strategic Income OSTIX for the last five years, has moved to the equity team. Hermanski has contributed a number of stock ideas to the fund in recent years, and he joins five existing full-time managers here, including firm founder John Osterweis.

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