A Sensible Small-Cap Option for Conservative Investors
Bronze-rated Royce Total Return has solid managers, a distinct approach, and a predictable risk/reward profile making it a solid choice for exposure to small-cap stocks.
Andrew Daniels: Bronze-rated Royce Total Return is a solid option for conservative investors looking for exposure to small-cap stocks. Chuck Royce has been the lead manager here since the fund's 1993 inception, and is supported by comanager Jay Kaplan, who's worked with Royce since 2000. The managers look for small-cap dividend-paying stocks to hold for three to five years, and they prefer firms with low debt and high returns on invested capital that are trading at reasonable valuations.
The fund has been a top performer over the long term thanks to its keen eye on risk control: It has provided solid downside protection but has tended to lag during market rallies. Given the bull market that's reigned for most of the past five years, it's not surprising that this fund has struggled on an absolute basis versus its Russell 2000 benchmark. However, it's reassuring that results still beat the benchmark and the typical small-blend peer on a risk-adjusted basis.
Andrew Daniels does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.