February 23, 2014
Dear Mr. Dreifus:
First of all, you have been wearing very pretty ties recently. But my compliment, although sincerely offered, is not the purpose of this letter, so I shall proceed to the substance at once.
A very substantial percentage of my personal IRA is invested in The Royce Special Equity Fund. Indeed, it is an inordinate percentage. Indeed it is a percentage so outsized, so imprudent, so reckless, that it would cause any level-headed adviser to advise in favor of its immediate reduction. At this time, however, I do not choose to reduce it, as I feel so comfortable with your approach, so confident of you taking care of my assets.
You have said that appreciation of your fund is an acquired taste. Let me say then that I have acquired it, and that I am one of your biggest fans.
Having said that, which is my rather artful way of avoiding that most unpleasant word "but", I should like to state a concern that has recently arisen.
While I was not altogether pleased with your decision to launch the Multi-Cap Fund, I understand and respect it, and I am certain that you would not have created the fund had you felt that there was any possibility that its creation would detract from the performance our our beloved RYSEX.
My concern is that in your desire, and in Royce Funds desire, to gather assets for your new fund you have permitted Royce Funds to present you as a "Star Manager". Please talk to Mr Royce immediately, and tell him to stop it!
There is nothing wrong with giving interviews or in explaining your investment process. In fact, I am very glad that you give interviews. I have learned from them and have gained confidence in my investment with you. Interviews are not the problem. I have enjoyed your stories about how you asked your mother to tell you numbers instead of bedtime stories as a child, about how you are the kind of man who would wear a belt AND suspenders, about your mystical connection with financial statements. How you are able to tell what kind of furniture is in the corporate office, just by looking at the balance sheet. All wonderful, and amusing.
But these stories, given in interviews in niche media, are now being synthesized, essentially for marketing purposes, into the myth of Charlie Dreifus, Super-Investor. Royce is currently running banner ads, which I have repeatedly seen on the Morningstar site, touting you, in bold letters as "a brilliant investor", crafting your image as an accounting geek, and proclaiming rather impishly "Sorry Folks, He's Ours!"
Mr. Dreifus, please tell Mr. Royce to stop this. Please. It is as if you are asking, pleading even, with the Universe to send you bad luck and a reversal of fortune. It is as if you are tired of doing well, and wish to run into trouble.
It is understood that you are far too modest to say these things about yourself. That's a given. It is also a given that these things may not in fact be false. (Indeed, the quote about you being a brilliant investor is from a piece written by Russ Kinnell, an analyst for whom I have profound respect.) Yes, okay. You are a brilliant investor, but I believe you are also wise enough to know that we must not say these things out loud. We must not paint them in bold letters.
Certainly, you have read some of the writings of John Bogle. One of his rules for investing in Mutual Funds is to not invest with the "Star Manager". Don't be a star manager, Mr. Dreifus. Please just do your work, and tell your boss to take down those horrible ads.
On my blog, I follow 30 mutual Funds. For the year-to-date Janus Contrarian leads with a gain of 5.31%. Your fund, Royce Special Equity is currently #30, dead last, with a loss of 3.56%. I have assured my devoted followers (both of them) that you will not finish the year in this ignominious position, and as my few prognostications are always correct, I am certain that you will not in fact finish there. I do believe however, that the recent rough sledding has been a gentle hint from the Universe to tone it down a little. As is written in the Book of Proverbs: "Pride goeth before destruction, and an Haughty spirit before a fall."
Your Friend,
M.F. Moron
P.S. You may reply to askmfmoron@gmail.com
Charlie Dreifus, manager of the MFM30 fund, Royce Special Equity.
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