A Fund to Watch

Posted by Ray on December 13, 2009 under Main | Be the First to Comment

One of my accounts has the Royce Special Equity Fund, it is a small blend portfolio, that has a pretty stellar track record. I do not like mutual funds, I prefer ETF’s as I have stated numerous times, but this one account I had left behind in a former 401k plan so it has funds in it. It has OK funds and it is a small account, so I never did anything with it and left it alone, I am lazy.

Regardless, this portfolio has done very well over the long-term. Last year it was done some 19% vs. the Russell which was down 33% and even in 1999 this fund moved to value when it wasn’t popular. Sure, in 1999 it had negative returns, big deal because look at the 2000-2003 returns, the PDF is below. However, the bulls say everything is great and the markets will shoot up another 20 or 30%, but here is this fund, which has killed the market over the long-term, and look at its cash position, it is currently holding 20% cash or cash equivalent.

Now, call me crazy, but that seems odd for a fund that is a long only fund and that has performed extremely well over the long-term. In fact, this flies in the face of “the everything is great” argument the bulls give us now. Based on the track record of the fund manager I am guessing they are a lot smarter than I and know the market pretty well. Considering they are holding so much cash seems a bit odd and bearish from my view point. I think we should pay attention to these guys considering they returned 16%, 30%, and 15% in 2001, 2002, and 2003, respectively, when most fund managers got crushed.

Royce Special Equity