NEW YORK, Sept. 26, 2016 /PRNewswire/ -- Can the shift to value account for the improved relative results for many small-cap active managers in the last year? A new white paper by Royce & Associates, LP, the small-cap equity specialist, suggests it might by showing a connection in small-cap performance patterns.

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Written by Steve Lipper, Senior Investment Strategist, The Undiscovered Connection: Value-Led Periods and Active Management analyzes performance results to reveal that small-cap active managers outperformed the Russell 2000 Index in most periods when value stocks led while tending to trail the small-cap index when growth stocks led.

"We compared Morningstar's Small Blend category average to the Russell 2000 and found that small-cap active managers often beat the index when small-cap value stocks led," said Mr. Lipper.

He also pointed out that value led in the majority--73%-- of small-cap markets from the inception of the Russell 2000 through 6/30/16, which contributed to greater relative success for active management. So while the Morningstar Small Blend category average beat the Russell 2000 in 66% of all rolling five-year periods through 6/30/16, it outperformed in 83% of value-led periods (though in only 21% of growth-led periods).

Mr. Lipper added, "What we found is notable: our research suggests that value-led markets were characterized by a larger number of stocks advancing, which seemed to help create an advantage for small cap active management."

"We think most investors will find it striking that there's a frequent concurrence of small-cap active managers outperforming when value led in small-caps," Mr. Lipper said. "We also believe that we may be in the early stage of a performance reversal of value leadership over growth which could have significant positive implications for small cap active managers."

Download a copy of the white paper, "The Undiscovered Connection: Value-Led Periods and Active Management."

About Royce & Associates, LP: Royce & Associates, LP, investment adviser to The Royce Funds, is a small-cap specialist offering distinct investment strategies with different risk/return profiles designed to meet a variety of investors' needs. Each of our strategies focuses on the kind of fundamental, intensive company research that we have done for more than 40 years. Chuck Royce, the firm's founder and a pioneer of small-cap investing, enjoys one of the longest tenures of any mutual fund manager. Royce & Associates, LP is an affiliate of Legg Mason Inc. (NYSE: LM). Royce Fund Services, Inc., the Fund's distributor, is a member of FINRA and the SIPC.

Important Disclosure Information

An investor should carefully consider each Fund's investment objective, risks, charges, and expenses before investing or sending money. This and other important information about The Royce Funds can be found in the Funds' prospectus. To obtain a prospectus, and information about The Royce Funds, please call (800) 221-4268 or visit www.roycefunds.com. Please read the prospectus carefully before investing.

For the Morningstar Small Blend Category: © 2016 Morningstar. All Rights Reserved. The information regarding the category in this piece is: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

There were 559 US OE Small Blend Funds tracked by Morningstar with at least five years of performance history as of 6/30/16.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. The Russell 2000 Index is an unmanaged, capitalization-weighted index of domestic small-cap stocks that measures the performance of the 2,000 smallest publicly traded U.S. companies in the Russell 3000 Index. The Russell 2000 Value and Growth indexes consist of the respective value and growth stocks within the Russell 2000 as determined by Russell Investments. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Distributor: Royce Fund Services, Inc.

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SOURCE Royce & Associates