End of June assets under management amounted to 25

If the hedge funds and institutional investors are more and more nervous for the small cap, management specialized on small caps shops, such as Royce & Associates, are on the deck to deal with a possible storm. Founded in the 1970s by Charles M. (called Chuck) Royce, in an era where "performance undercut the morale, otherwise the Bank, investors in small cap" New York company has since crossed over a period of euphoria and shortfalls. From the beginning, Chuck Royce took the party to go against the grain, applying the precepts of management values discounted for small caps (at a time where the profession is concerned that in the hope to find the IBM or Xerox of tomorrow).

As all the followers of the "value" style, the latter therefore concentrated to well understand the intrinsic value of companies to update the companies clearly neglected by the market. But in this universe where the penalties are increased by the lack of liquidity, is applied in particular to reduce the risk. Refining its approach over time, he therefore came to distinguish a risk "of activity", against which it must protect themselves by ensuring that the balance sheets and the risk-taking are strong enough to withstand the economic adversity. Added the risk of "valorisation", trying to minimize via strong haircuts, of the order of 50, the estimated value. Finally come the risk of "market", the parade is to invest in companies coming out of the beaten, and the risk of portfolio, which is a sectoral diversification.

Thirty years later, as the small cap became a full-fledged asset class, this method has seduced Legg Mason, a grand name of "value" management, gave a new impetus to society. End of June, assets under management amounted to $ 25.1 billion. Among its flagship products, Royce 100 Funds Fund aims to bring together the best 2.5 and represent the entire of its investment universe, Supervised by Chuck Royce in person, the Fund is co-managed by James a. (nicknamed Chip) Skinner, who has served as Manager of small caps, and hedge funds on the small caps.

To hold 100 values in this vast universe, Chip Skinner draws including the restructuring and management changes, one of the usual viviers of haircuts. The Manager takes for example Knight Capital Group, a specialized U.S. broker on... the small caps! "The course is always penalized by reputation, tarnished by the scandals of 2002". Its new CEO, Tom Joyce, yet orchestrated a profound reorganization and defined a relevant strategy. It has set itself the goal of becoming a "pure player" in the electronic brokerage and has produced some beautiful acquisitions in this sense. "It has also assets which could be transferred to finance this repositioning", defends the Manager.

He also cited Navigant Consulting, a company legal counsel who has broken with bulimia of acquisitions in the 1990s, and eFunds, a financial services provider which offered a mixed of activities without real synergy. Its new CEO has since employee to rationalize the different branches, including highlighting electronic payment services.

Between other traditional sources of haircut, Chip Skinner target also companies whose underlying assets or with the potential for growth are poorly understood by the market. Among the main ten lines of the portfolio, he thinks Franklin Electric, a manufacturer of small electric motors, which ventured to compete with two major customers, and Dolby Lab, the leader of the sound film. "Growth, until then very profitable, has slowed with the settlement of sales of DVD players." "With the launch of new standards and the generalization of the audiovisual equipment in the car, it should however experience a resurgence of activity", includes Chip Skinner. It also refers to Brady Corp., a manufacturer of machines for labelling, whose margins recovery efforts are gradually integrated in the courses, and Ceridian, a society of human resources, including the management team services strives to align the profitability on its competitors.

In this quest of haircut, Chip Skinner looks on failures in the profits. He mentioned to support International Coal Group, whose results have been encumbered by the Sago mine explosion, or Adesa, specialist services for vehicles, which has suffered a major loss of profits with one-upmanship of promotions in the nine. The Manager also distinguishes Perrigo, a laboratory of generics. "Sales have been penalized by a change in legislation on allergy products, traces it." But this point disappointment does call into question its growth, strong in this sector. Branch has also demonstrated skill in its acquisitions since its already has a positive effect on earnings per share.