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royce distribution

edited December 2012 in Fund Discussions
i have held rseix for years, the fund had negligible distibutions, if any. it is pretty much buy and hold with very low turnover. Today though it distributed a fairly large amount of dividends and long-term capital gains (mostly the latter). So the investment manager specifically now realized all those gains incurred over the years. another example how upcoming higher taxes change behavior of individuals, corporations and, in this case, money managers. fwiw.


  • Most interesting, fundalarm. I would not have been surprised with some individuals selling before year end, even considered if more monies would or will move into muni bonds next year; was more surprised to find companies issuing special dividends and related and now this example of distributions.
    A very complex investment world into which we find ourselves invested, eh?
    Thank you and take care,
  • fundalarm, as RYVFX has been gravitating toward a mid-cap fund, I decided it was time to exit and realize my LTCG. I did so on Wednesday which was the record date. Since it no longer fit for me, I did not want the distributions, which were about 5.5% of NAV.
  • It turns out that RSEIX (Royce Special Equity, Institutional Class) had a LTG distribution last year (2011) of $1.0775 on a reinvestment share price of $19.35, or about 5.57%. That compares with this year's LTG distribution of $1.0981 on a reinvestment price of $20.62, or about 5.33%. So this year is not a one-off, due to a one-time event of money managers expecting cap gains tax increases in 2013.

    There is further evidence of the possible cap gains tax increase being a nonevent (as far as RSEIX is concerned). Fundalarm is correct that Royce Special Equity has had negligible distributions in some years. 2010, 2009 - no cap gains, 8-9c in income. But it's varied year by year.

    2008 - 69c LTG + 5c STG + 23c income on $13.13 share price (5.26% on LTG, let alone STG and income)
    2007 - $2.14 LTG + 18c STG + 14c income on $18.65 share price (11.3% on LTG)

    In addition, 2010 had similar uncertainty about cap gains tax rates going up, and that was one of the years with miniscule distributions. Same manager (Dreifus), so the difference is not because the fund had different managers who took a different approach to cap gains.

    What I think we're seeing here, and I'm as susceptible to it as anyone else, is confirmation bias. The tendency to see facts that confirm our hypothesis (e.g. that for most of the immediately preceding few years there were almost no cap gains, "confirming" a change in pattern), and ignoring facts that contradict our hypothesis (see above).

    The risk of selective use of facts (albeit unintentional) is why I feel it is so important to look at raw numbers, discount anecdotal information, and challenge one's own assumptions. I can get off my soapbox now - not picking on fundalarm here, I really believe that we all do this to some degree, and this is just my anecdotal example used as "proof".:-)

  • edited December 2012
    Also, a decent 5% or so cap gain in RYPNX (Opportunity) last week. They've only had LTCG distributions before at YE 2005-2008 and 2011 and never a substantial dividend.

    In a high turnover fund like RYPNX I've always seen this as a sign of the managers doing their job, buying low and selling high, especially when CG distributions come in every good market year. Were they to miss a year, I'd suspect them of losses in high redemption years, for example Dodge & Cox hasn't paid a capital gain since 2008 and estimates they won't pay one this year, as investors bailed out when the fund tanked in 2008-09.
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