Industrials was the largest source of relative outperformance in the year-to-date period, with both our overweight and superior stock selection boosting performance. Financials also contributed as alternative asset manager Ares Management (NYSE:ARES) gained steadily throughout the first half. A market leader in managing private credit pools, Ares continues to benefit from strong fundraising, as investors favor investments delivering attractive yields in a period with generally low interest rates. The largest source of relative underperformance was the Fund’s cash holdings. The average level of cash in the first half was not high at 3%, but in a period with strong absolute returns, almost any amount is a meaningful drag on performance. The second-biggest relative detractor was Real Estate, where the Fund’s lack of exposure ”¨to the equity REIT industry hampered relative results, as this was an index-beating group within the overall small-cap market in the first half.
From the Royce Premier Fund second-quarter 2019 manager commentary.
