Charlie Dreifus on Wealth Track

    Charlie Dreifus, manager of Royce Special Equity Fund (RYSEX), gives his usual amusing interview on this week's edition of Wealth Track with Consuelo Mack. To a large extent he talks about his newer fund, Royce Speacial Equity Multi-Cap (RSEMX).

    We're also starting to see ads for RSEMX. Charlie and Royce Funds seem to be wanting to pump up the AUM for this newer fund. It's not hard to understand why. Charlie is currently managing 3.5 billion in his small cap fund, but only 180 million in his mid to large-cap fund -- (roughly 20 times more money in the small cap fund).

    He rightly states in this interview that the management fee (for RSEMX) has been lowered to a very fair .85%. However, that doesn't tell the whole story. According to the Royce Funds website, there is also a "distribution" (12-b1) fee, plus a fee of .26% for "other expenses". A fee waiver at present keeps current fees at 1.24%, but that is still too high. An investor needs to understand that these fees do not include trading costs. Even with the waiver, total fund expenses are going to be around 1.5%.

    12b-1 fees are essentially evil, but tolerable if the management fee is low enough. The fee for "other expenses" is uncommon, although it is also levied for other Royce funds. All told, 1.5% is a heavy burden to have to drag along. It's not easy to beat any benchmark by 1.5% over time.

    Despite the fees, the newer fund is intriguing, and should do well. It is troubling, however, to see ads trumpeting Charlie Dreifus as "a brilliant investor". Does the Moron believe him to be a "brilliant investor"? Well......yes, but it's still disturbing to see it writ large in advertising.