My Interview with Steven McBoyle: PM at Royce Funds


Steven G. McBoyleI had the opportunity to interview Steven  McBoyle, one of the portfolio managers from Royce Funds. Royce Funds is a family of over 20 small cap value funds, founded by Charles Royce. Nearly all the funds have beat their benchmark (the Russell 2000) by wide margins over 5, 10, 15 year periods and longer. (Disclosure: I have some of my assets invested in several Royce funds, although none that are managed by Steven McBoyle).

Below is Steven’s bio:

Steven G. McBoyle, CPA, CA, is a portfolio manager for Royce & Associates LLC, investment adviser for The Royce Funds. He manages Royce SMid-Cap Value Fund (with Whitney George) and Royce SMid-Cap Select Fund. Mr. McBoyle joined Royce in 2007. He was previously a Partner (2005-2007), Portfolio Manager (2004-2007) and Senior Research Analyst (2001-2003) at Lord Abbett & Co. Prior to that, he was a vice president, mergers & acquisitions, at Morgan Stanley (2000-2001). Similarly, he was a vice president, mergers & acquisitions, at Salomon Brothers (1997-2000). Prior to that, Mr. McBoyle worked at Deloitte & Touche (1990-1995). Mr. McBoyle holds a bachelor’s degree from the University of Waterloo, Canada, and a Master of Business Administration from Columbia University. He is also a chartered accountant, with a degree from the Institute of Chartered Accountants in Ontario, Canada.

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The full interview is posted on Gurufocus at the following link-

Below are some brief excerpts:

So besides your father, did anyone else have a large influence on your investment philosophy?

Steven: Honestly, it is impossible to point to any one or two specific individuals. Many have shaped it over the years. Obviously, I was deeply shaped by my father’s sense of value. Then beyond that, I had the good fortune of knowing Michael Burry at Scion Capital, at the very early period.

Before The Big Short, and before he became super famous?

Steven: Yes. Back in the mid 90s I knew Michael. Then I was taught by Bruce Greenwald and Joel Greenblatt while at Columbia Business School. And, through my investment career, I have had the good fortune of having some incredible working relationships with some wonderful mentors; Robert Fetch at Lord, Abbett; Whitney George, and Chuck Royce at Royce. And, of course while at Columbia Business School, I read everything there is on Warren Buffett and his business methods. I suspect over time I have drawn on elements of each philosophy.

Later in the interview, Steven had some interesting thoughts on the railroad industry and regulation.

The rails back in 1930 accounted for some 80% of all the freight ton miles in the U.S. versus some 40% today. In the mid 50’s, we had the construction of the national interstate system. The trucks, by the use of the public right of ways, were able to use this high speed, low density, interstate system. This gave the truckers a huge competitive advantage versus the rails. This dynamic since the 50s served effectively as a catalyst for the trucks to gain some 30 points of share relative to the rails over a 30-year period. Interestingly, during the early 80s to 2005 time period, the U.S. vehicle miles grew by some 100% while the lane miles declined by 6%. So the U.S. needs to add some (I think it is) 13,000 lane miles per year just to maintain today’s congestion level. Yet, as we know, most public highway funding is earmarked for repair and maintenance only. And then on top of that, the big catalyst, we had the passing of the Staggers Act, which deregulated the rail industry; it allowed the rails to competitively price their product and embark on service enhancing technology. So fast forward to today, and the rail industry is composed of seven Class 1 rails that account for some 90%+ of the industry (which is down from 40% in 1980); close to 50% of the nation’s freight movements are captive; rails are able to flex the model, quite effectively; the interstate today is low speed, high density; the rail service is competitive with on time service over 80%; rails have two to four times fuel efficiency advantage over trucks; and, the rails have pricing power. Again, all of that is allowing the rails for the very first time to exhibit underlying operating leverage.

To read the full interview on Guru Focus, click here.

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