Our tale begins in 1998 with mutual fund pioneer Chuck Royce, who was looking for a way to better align fund investors' interests with managers' interests. Managers typically get a fee based on the fund's size, and investors absorb its expenses. Even if investors get stomped, the managers still get their fee. Royce Select was designed to be different. Royce & Associates (now owned by Legg Mason) would get 12.5% of any profits that investors made, and would absorb all the expenses. If the fund's value declined after the managers took a fee, they wouldn't get any additional fees until the fund rose above the "high-water mark" at which the last fee had been paid.