Bill Hench: The Select Fund is one that is not as broadly diversified, so at June 30, 2014 we had less than 100 long positions. So it's more concentrated. We also are able to short stocks in that portfolio, and we don't do it as a hedge but rather as just another way to make money in the portfolio.
In practice, what happens is we have had about 100 long names and about 10 to 30 short names. The shorts come out of the work that we find when we're looking for longs. So, in other words, if we think something is very expensive—especially on what we think is a growth rate that's not going to be met—we may take a short position in that.
Unlike the Opportunity Fund, our biggest positions in the Opportunity Select Fund can get over 1% and generally stop at about 2.5%. The reason we did it was because it provided a different way for investors to take advantage of what we think is a great place to invest in small- and micro-cap names.
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The thoughts and opinions expressed in the video are solely those of the person speaking and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.
This material is not authorized for distribution unless preceded or accompanied by a currentprospectus. Please read the prospectus carefully before investing or sending money. Royce Opportunity Select Fund (ROS) and Royce Opportunity Fund (ROF) invest primarily in small-cap companies, which may involve considerably more risk than investing in larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.) ROS invests primarily in a limited number of stocks, which may involve considerably more risk than a less concentrated portfolio because a decline in the value of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) ROS may sell securities short which involves selling a security it does not own in anticipation that the security's price will decline. Short sales present unlimited risk on an individual stock basis since the Fund may be required to buy the security sold short at a time when the security has appreciated in value. ROS may invest up to 25% of its net assets in foreign securities (measured at the time of investment), which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.) ROF's broadly diversified portfolio does not ensure a profit or guarantee against loss.