Pricey tech stocks are often anathema to value investors, but one of the fund world's bargain-hunters is launching a fund that focuses strictly on the battered sector.
is rolling out the
Royce Technology Value
fund, according to paperwork filed Monday with regulators. The move may shock some people because the New York-based value shop has concentrated strictly on cheap small- and micro-cap stocks for more than 25 years.
Value die-hards might scoff at the idea of fishing for bargains in techland, where a company's story often seems to matter more than its valuation. But others would argue that the move is a savvy effort to sift for bargains with the tech-laden
down some 60% from its March 2000 peak.
The upshot for fund investors is that, like most of the vast ocean of rookie tech funds out there, this one is a wait-and-see proposition. That said, Royce's interest in the sector does argue in favor of the sector's building momentum.
The fund will focus on micro-, small- and mid-cap tech stocks in the U.S. and abroad that look cheap vs. their peers, given their future prospects and current price tag. The filing also allows plenty of leeway to hold shares of big-caps, too.
Some might wonder how much expertise a value manager has in picking tech stocks. At the end of the third quarter, Royce's funds had 19% of their money in the tech sector. But the firm has farmed out that job to Jonathan Cohen, who founded JHC Capital last April.
The Greenwich, Conn., outfit runs a private tech fund with $6 million in assets. He spent the previous 14 years in tech equity research at firms including Wit SoundView, Merrill Lynch, UBS and Smith Barney, but the filing doesn't note any previous retail fund-management experience.
The Royce tech fund will sell without a load, or sales charge, but its 1.99% annual expense ratio is higher than the average tech fund's 1.75%, according to Chicago research house Morningstar.
If the fund's pedigree seems less than stellar, its timing is intriguing. A glut of tech funds have been launched since the late 1990s brought us tech mania; two-thirds of all tech funds are less than 3 years old. Many of these took flight just in time for the sagging economy and whittled corporate earnings to sink tech funds, which fell 38% on average last year. But hopes for an economic comeback this year have revived tech funds -- they're up 37% over the past 90 days.
The bottom line is that Royce's growing tech appetite is good news for tech fans, but there are plenty of older, battle-tested options out there.
Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
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