Legg Mason IF Royce US Smaller Companies X

A smaller cap diversified US equity fund with a growth at a reasonable price bias.

  • 265.30p
    Price (Inc)

    These are the shares in the fund that pay out an income to clients. The income is made up of the total dividends – the money a company can pay out to its investors – from the companies in the fund.

  • -
    Price (Acc)

    These are the shares in the fund that don’t pay out an income to clients. Any dividends – the money a company can pay out to its investors – are reinvested into companies in the fund. Despite no income, the shares should be worth more over time. Good incentive, eh?

  • 0.00%

    Initial charge

    Some funds charge you when you first invest, which is aptly known as the initial charge. They’re usually between 3-5% but at Bestinvest, we usually don’t charge you a penny!

  • 0.75%
    Annual management charge

    This is how much the fund management company charges to run the fund. It’s like paying a babysitter, dog sitter or house sitter (that makes well-informed, heavily researched changes to improve your baby/dog/house when needed).

  • 0.98%
    Ongoing charges

    This stands for Ongoing Charges Figure. It’s the cost of running a fund and includes admin fees, manager fees, administration costs, etc.

  • 0.40%
    Yield

    How much the fund is currently paying out in income to investors. It’s NOT to be confused with the overall growth of a fund – a very different thing indeed. It’s also NOT a guarantee of future pay-outs, just a snapshot. This is more what it’s not than what it is…

Prices as at 04 March 2021, fund data last updated 23 December 2014

The fund targets capital growth by investing in securities of smaller US companies. Legg Mason outsource the management of this fund to a subsidiary company, Royce & Associates, based in New York, who have managed funds of small and microcap stocks since the 1970s. The style targets "quality" companies defined as those with sustainable growth records, a high return on capital, generate free cash flow, with low levels of leverage and run by experienced executives. Such companies are bought when they are out of favour, trading below the investment team’s assessment of their current worth and with a market cap of between US$500m to US$5bn.

Fund summary

Sector North American Smaller Cos
Structure OEIC
Launched December, 2012
Size £190m
Yield 0.40%
Charging basis Income
Dividends paid Acc units only

Charges

Standard initial charge 0.00%
Initial charge via Bestinvest 0.00%
Additional bid/offer spread 0.00%
Annual management charge 0.75%
Ongoing charges figure 0.98%

Allocation

Proportion (%)

  • {{chartDataItem.text}}
    {{chartDataItem.value}}

Allocation

Proportion (%)

  • {{chartDataItem.text}}
    {{chartDataItem.value}}

Allocation

Proportion (%)

  • {{chartDataItem.text}}
    {{chartDataItem.value}}

Investment process

This fund is benchmarked for reference purposes only against the Russell 2000 index, however, the style bias of this fund implies that performance characteristics will vary considerably on occasions. The fund focuses on US companies with a market cap less than US$5bn, though stocks may continue to be held once they grow above this. Approximately 15% of the portfolio is likely to be in micro-cap companies of below US$1bn; it will also hold some equities that have crossed over to the mid cap sector as a result of good performance. Stock selection initially targets quality business models that exhibit a high return on capital, generate free cash flow and have low levels of leverage. Royce buys these companies whilst they are depressed either due to a quarterly earnings estimate being missed or the industry itself being out of favour and when they trade at 30-50% discount to Royce's estimate of their worth. In the past, stock turnover has been in the region of 25%.

Historically, the managers' style of long only equity investment has provided investors with superior capital protection and low volatility of returns. We hold manager Lauren Romeo in high regard, she knows her investments in detail and started out as an analyst on the fund when it launched. However the quality, small cap nature of the portfolio has been out of favour for some time as the Fed's market stimuli have led to investors favouring larger companies and those with higher gearing. The loss of the co-CIO at Royce & Associates in November 2014 prompted a downgrade from 5 to 3 stars.

Manager research

Average monthly relative returns

  • 16/17 -0.54%
  • 17/18 -0.10%
  • 18/19 -0.30%
  • 19/20 0.04%
  • 20/21 -0.11%

Bestinvest MRI

  • 3 years -0.12%
  • 5 years -0.20%
  • Career -0.26%
  • 3 years 45.20%
  • 5 years 33.40%
  • Career 22.70%

Performance figures are based on the average of monthly percentage returns relative to the benchmark index.

Lauren Romeo

Romeo is a Portfolio Manager for Royce & Associates, LLC, investment adviser to The Royce Funds. She has been co-manager of the Royce Smaller Companies fund (in the UK this is the same as the Legg Mason US Smaller Companies fund) since launch in 2004. She also manages Royce Select Fund I and serves as Portfolio Manager (“PM”) for Royce 100 Fund (with Charles Royce as Lead Portfolio Manager). She is an Assistant PM for Royce Pennsylvania Mutual, Royce Premier Fund and Royce Value Fund, as well as for Royce Value Trust, a closed-end fund. She joined the firm in 2004 as an Analyst. Previously, she was a PM at Dalton Greiner, Hartman & Maher (since 2001), an Analyst with Legg Mason Funds Management (2000-2001) and an Analyst with T. Rowe Price Group (1996-2000). Romeo holds a bachelor’s degree from the University of Notre Dame, an MBA from the Wharton School of the University of Pennsylvania and is a CFA.

Track record

Lauren Romeo has 9.8 years experience of managing mutual funds in this sector. Over this period the average monthly return relative to the benchmark index has been -0.26%. During the worst period of relative performance (from July 2011 - December 2020) there was a decline of 32% relative to the index. The worst absolute loss has been 28%.

Periods of worst performance

Absolute -28.00% (December 2019 - March 2020)
Relative -32.00% (July 2011 - December 2020)

About the MRI

Our unique indicator: the Bestinvest Manager Record Index (MRI) measures the likelihood that the fund manager is adding value through their decisions. It is based on their performance record over the course of their career, adjusted for the amount of risk taken. MRI is an important contributor to our fund rating system but it is also vital to take account of qualitative factors. It is also very important to select funds to form a cohesive portfolio with an appropriate overall risk level.

Allocation

Proportion (%)

  • {{chartDataItem.text}}
    {{chartDataItem.value}}

Allocation

Proportion (%)

  • {{chartDataItem.text}}
    {{chartDataItem.value}}

Allocation

Proportion (%)

  • {{chartDataItem.text}}
    {{chartDataItem.value}}

Top 10 holdings

Data accurate as at 30 June 2020

2.4575% Esco Technologies Inc
2.4054% Heidrick & Struggles Intl Inc
2.3823% Kennedy-Wilson Hldgs Inc
2.3517% Meritor Inc
2.3152% Landstar Systems Inc
2.3058% Mks Instruments Inc
2.2722% John Bean Technologies Corp
2.245% Inter Parfums Inc
2.217% Kadant Inc
2.1548% Korn-Ferry International
Source: Trustnet

Sector breakdown

Industrials 33.00%
Information Technology 22.00%
Financials 10.00%
Consumer Discretionary 10.00%
Health Care 7.00%
Consumer Staples 4.00%
Materials 4.00%
Real Estate 3.00%
Energy 3.00%
Others 3.00%

Portfolio

As at 30/11/14: 76 stocks, 7% cash, weighted average market cap £3bn. Large caps (>$5bn) 15%; Mid caps ($2.5bn-$5bn) 30%; small caps ($1bn-$2.5bn) 40%; micro caps (<$1bn) 15%. Average 1-year forward PE = 15x.

Constraints

Portfolio of 80-100 names. Max 5% in any one holding. Max 30% in top ten stocks. Max 25% in a single sector.

Key Investor Information

Download