Royce Global Value Trust Manager Commentary
article 12-31-2022

Royce Global Value Trust Manager Commentary

While the near-term forecast for equities is as unclear as any we can recall, we see better weather over the long-term horizon, especially for global small-cap stocks, and think our holdings appear well positioned for a market that is more focused on fundamentals and/or from a reaccelerating global economy.


Fund Performance

Royce Global Value Trust (“RGT”) fell -27.0% on a net asset value (“NAV”) basis and -33.1% on a market price basis in 2022 versus a decline of -18.7% for its unleveraged benchmark, the MSCI ACWI Small Cap Index, for the same period.

What Worked… And What Didn’t

Nine of the Fund’s 10 equity sectors detracted from performance in 2022, with the largest negative impacts coming from Industrials, Information Technology, and Financials. Energy made a positive contribution (as did our cash holdings) while the smallest detractions came from Materials and Consumer Staples. Electronic equipment, instruments & components (Information Technology), capital markets (Financials), and professional services (Industrials) detracted most at the industry level while energy equipment & services (Energy), diversified consumer services (Consumer Discretionary), and metals & mining (Materials) were the three biggest positive contributors in 2022.

RGT’s top detractor at the position level was U.K.-based Marlowe, which provides a wide range of services and related software products such as testing and certification of fire safety systems, HR compliance and e-learning software, and audits to ensure compliance with environmental regulations. In November, Marlowe published first half results that showed revenue growth and margin improvement that nonetheless led to a sell-off, as the market found fault with Marlowe’s cash generation: The company booked working capital outflows, mostly caused by timing issues that will unwind in 2023, and higher one-off restructuring costs. We see these elevated costs as temporary and expect cash generation to normalize, particularly as management has suggested the pace of M&A may moderate moving forward in the uncertain macro environment. More important, we do not believe these issues impair Marlowe’s long-term value creation pathway. Countryside Partnerships is a U.K. housebuilding and urban regeneration company that operates mostly in London and Southeast England. Its stock was falling amid a dismal U.K. housing market, which was a factor in the company’s agreement to be acquired in September 2022 at a price that was lower than prior bids, creating a loss for RGT’s position in 2022.

The portfolio’s top contributor at the position level was EVI Industries, a U.S. company that distributes commercial laundry and dry-cleaning equipment, industrial boilers, and related parts. While revenues had been relatively steady through the first half of 2022, the company’s earnings had declined for four consecutive quarters, leading investors away from its stock. Its shares then began to rebound vigorously in September, however, when EVI reported significant improvement in operating income and revenue for the fiscal fourth quarter and fiscal year of 2022. Canada’s LifeWorks provides employee well-being solutions through an integrated platform that includes confidential counselling, employee engagement tools, perks, and health programs. LifeWorks’ services are proven to boost productivity and reduce absenteeism, producing a strong customer benefit. We also liked that, despite this strong customer benefit, its services cost just $2-4 per employee per month, resulting in a loyal customer base. In June 2022, LifeWorks received an acquisition offer from Telus, a large communication services company, at a significant premium.

The Fund’s disadvantage versus the MSCI ACWI Small Cap came from stock selection in 2022—our sector allocation decisions were additive. At the sector level, stock picking hurt most in RGT’s three largest sectors: Industrials, Financials, and Information Technology. Conversely, our substantially lower weightings in both Consumer Discretionary and Real Estate gave us a relative advantage, as did the Fund’s cash holdings in 2022.

Top Contributors to Performance 20221 (%)

EVI Industries0.73
Alamos Gold Cl. A0.34
Griffon Corporation0.30
Stadio Holdings0.29

1 Includes dividends

Top Detractors from Performance 20222 (%)

Countryside Partnerships-0.99
XP Power-0.92
MarketWise Cl. A-0.82
Mesa Laboratories-0.78

2 Net of dividends

Current Positioning And Outlook

While the near-term forecast for equities is as unclear as any we can recall, we also see better weather over the long-term horizon, especially for global small-cap stocks. Indeed, throughout 2022 we have often been struck by the contrast between the more confident—albeit cautious—outlooks from the many management teams we’ve met with and the fatalistic headlines we see almost every day. Of course, we believe our companies boast generally strong long-term growth prospects, low debt, positive free cash flows, high returns on invested capital, and/or proven management expertise and what we think are attractive valuations. Overall, they appear well positioned for a market that is more focused on fundamentals and/or from a reaccelerating global economy. And while recession remains a reality or possibility (depending on geography), none of us knows how long it will last or how deep it will go. History does show us that any recession—like any bear market—is ultimately finite and that any recession will be followed by a recovery. It’s worth keeping in mind that history also shows that small caps will likely begin an upward move before many of us know for sure that the global economy is rebounding in earnest. For this and other reasons, we would welcome any degree of increased scrutiny of company fundamentals.

Average Annual Total Returns Through 12/31/22 (%)

RGT 9.48-33.08-33.08-0.091.723.67
XRGTX (NAV) 12.24-27.04-27.040.522.264.62

Annual Operating Expenses: N/A

1 Not annualized.

Important Performance and Disclosure Information

Important Performance and Expense Information

All performance information reflects past performance, is presented on a total return basis, and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Current performance may be higher or lower than performance quoted. Returns as of the most recent month-end may be obtained at The market price of the Fund's shares will fluctuate, so that shares may be worth more or less than their original cost when sold.

The Fund invests primarily in securities of small-cap and mid-cap companies, which may involve considerably more risk than investing in larger-cap companies. The Fund's broadly diversified portfolio does not ensure a profit or guarantee against loss. From time to time, the Fund may invest a significant portion of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments.

Current month-end performance may be obtained at our Prices and Performance page.

Notes to Performance and Other Important Information

The thoughts expressed in this report concerning recent market movements and future prospects for small company stocks are solely the opinion of Royce at December 31, 2022, and, of course, historical market trends are not necessarily indicative of future market movements. Statements regarding the future prospects for particular securities held in the Funds’ portfolios and Royce’s investment intentions with respect to those securities reflect Royce’s opinions as of December 31, 2022 and are subject to change at any time without notice. There can be no assurance that securities mentioned in this report will be included in any Royce-managed portfolio in the future.

As of 12/31/22, the percentage of Fund assets was as follows: EVI Industries was 3.0%, LifeWorks was 0.0%, Alamos Gold Cl. A was 1.6%, Griffon Corporation was 1.2%, Stadio Holdings was 1.6%, Marlowe was 1.0%, Countryside Partnerships was 0.0%, XP Power was 0.3%, MarketWise Cl. A was 0.3%, Mesa Laboratories was 1.4%.

Sector weightings are determined using the Global Industry Classification Standard (“GICS”). GICS was developed by, and is the exclusive property of, Standard & Poor’s Financial Services LLC (“S&P”) and MSCI Inc. (“MSCI”). GICS is the trademark of S&P and MSCI. “Global Industry Classification Standard (GICS)” and “GICS Direct” are service marks of S&P and MSCI.

All indexes referred to are unmanaged and capitalization weighted. Each index’s returns include net reinvested dividends and/or interest income. Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. The Russell 2000 Index is an index of domestic small-cap stocks. It 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 Russell Microcap Index includes 1,000 of the smallest securities in the Russell 2000 Index, along with the next smallest eligible securities as determined by Russell. The Russell 2500 is an unmanaged, capitalization-weighted index of the 2,500 smallest publicly traded U.S. companies in the Russell 3000 index. The returns for the Russell 2500-Financial Sector represent those of the financial services companies within the Russell 2500 index. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. The MSCI ACWI Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks.The MSCI ACWI ex USA Small Cap Index is an index of global small-cap stocks, excluding the United States.The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index. Returns for the market indexes used in this report were based on information supplied to Royce by Russell Investments. Royce has not independently verified the above described information.

This material contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including, among others, statements as to:

-the Funds’ future operating results,

-the prospects of the Funds’ portfolio companies,

-the impact of investments that the Funds have made or may make, the dependence of the Funds’ future success on the general economy and its impact on the companies and industries in which the Funds invest, and

-the ability of the Funds’ portfolio companies to achieve their objectives.

This discussion uses words such as “anticipates,” “believes,” “expects,” “future,” “intends,” and similar expressions to identify forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements for any reason.

The Royce Funds have based the forward-looking statements included in this commentary on information available to us on the date of the commentary, and we assume no obligation to update any such forward-looking statements. Although The Royce Funds undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise, you are advised to consult any additional disclosures that we may make through future shareholder communications or reports.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see ""Primary Risks for Fund Investors"" in the prospectus.)



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