Royce Global Value Trust Manager Commentary
article 06-30-2021

Royce Global Value Trust Manager Commentary

We are cautiously optimistic that the global economy will continue to expand, benefiting the more economically sensitive sectors of the world’s economies, particularly as supply chains are reestablished and pent-up demand is released.


Fund Performance

Royce Global Value Trust advanced 9.5% on an NAV (net asset value) basis and 12.1% on a market price basis for the year-to-date period ended 6/30/21, posting strong absolute results that nonetheless trailed the 15.4% gain for its benchmark, the MSCI ACWI Small Cap Index, for the same period. The Fund’s relative results were stronger over longer-term periods as it beat its global small-cap benchmark on both an NAV and market price basis for the three- and five-year periods ended 6/30/21.

What Worked… And What Didn’t

Five of the 10 equity sectors in which the Fund held investments made a positive contribution to performance in 2021’s first half. Industrials led by a wide margin, followed by Financials and Information Technology. Of the four sectors that detracted—Health Care was essentially flat—Materials, Communication Services, and Consumer Staples made the largest negative impact. At the industry level, two areas from Industrials made significant positive contributions—professional services and trading companies & distributors—while insurance (Financials) was also notably strong. The three industries that detracted most were internet & direct marketing retail (Consumer Discretionary), metals & mining (Materials), and interactive media & services (Communication Services).

The Fund’s top contributor at the position level was Marlowe, a firm based in and focused on the United Kingdom. Marlowe provides a range of commercial services and software products grouped into four areas: Health and Safety, Fire Safety, Water Safety, and Air Quality. We like the company’s position in essential, critical, and/or mandated services in growing markets, each with a highly fragmented customer base. Marlowe is also an acquisition-led consolidator of its large and fragmented markets, which enables it to re-deploy its cash flows into M&A and breeds cross-selling opportunities and scale advantages. The second quarter saw a steady flow of positive news, including M&A announcements and the release of final results at the end of June that showed improved revenue and earnings. Next came AutoCanada, a North American automobile business that sells multiple brands and operates 50 franchised dealerships in Canada, as well as a group in Illinois. In early May, the company reported record-setting revenue and earnings along with a ninth consecutive quarter of outracing the Canadian new vehicle retail market, though AutoCanada’s used vehicle and F&I (Finance & Insurance) segments were the key drivers behind 1Q21’s improved earnings.

RGT’s top detracting position was CDON, a Swedish e-commerce company that operates a website which sells music, books, t-shirts, and other merchandise—it is phasing out a legacy brick-and-mortar retail business. As an established e-commerce name in Nordic countries, CDON is expected to grow rapidly in the region, where online shopping habits trail those in much of the developed world but are expected to catch up in the coming years. The company hit a speed bump earlier in the year when a new technical platform proved both more expensive and harder to bring to optimal functionality than anticipated. Thinking that the company can overcome these obstacles, we held our shares at the end of June. The next biggest detractor was Haemonetics Corporation, which designs and manufactures automated systems for the collection, processing, and surgical salvage of donor and patient blood while also offering related information services and data management software. Its shares suffered a significant decline in April with the departure of a large customer in plasma distribution. Confident in the company’s expertise in its niche, we maintained our stake at the end of June.

Relative to the MSCI ACWI Small Cap in the first half of 2021, both stock selection and sector allocation hurt, with the former making a much larger negative impact. On a sector basis, ineffective stock picks in Materials and an equal combination of our lower weighting and poor stock picking in the resurgent Energy sector detracted most, along with the negative effect of the Fund’s cash holdings. On the other hand, our higher weighting in Industrials was additive versus the benchmark. Also helping relative performance were our lower weighting and savvy stock picks in Real Estate and our lack of exposure to Utilities, two sectors that lagged within the benchmark.

Top Contributors to Performance Year-to-Date Through 6/30/211 (%)

ProAssurance Corporation0.51

1 Includes dividends

Top Detractors from Performance Year-to-Date Through 6/30/212 (%)

Haemonetics Corporation-0.43
Cartrack Holdings-0.26
a2 Milk Company Ltd.-0.25
TKC Corporation-0.22

2 Net of dividends

Current Positioning And Outlook

Our outlook has not changed in any significant way since the end of 2020. In spite of considerable near-term uncertainty, we believe that the global economic recovery will continue, albeit with more fits and starts—as well as market volatility—than many were anticipating as recently as May. In July, however, worrisome signs of a slowdown came from China, and the globe faces a major challenge in containing the Delta COVID variant. We are cautiously optimistic, however, that the global economy will continue to expand, benefiting more economically sensitive sectors of the world’s economies, particularly as supply chains are reestablished and pent-up demand—which remains robust through most of the developed world—is released. As always, we are prepared to act when market volatility gives us the opportunity to build existing holdings at more attractive prices.

Average Annual Total Returns Through 06/30/21 (%)

RGT 5.4212.1340.9516.1517.389.05 10/17/13
XRGTX (NAV) 5.689.5040.7713.3215.139.09 10/17/13

Annual Operating Expenses: N/A

1 Not annualized.

Important Performance, Expense 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 June 30, 2021, 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 June 30, 2021 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 6/30/21, the percentage of Fund assets was as follows: Marlowe was 1.8%, AutoCanada was 0.9%, Transcat was 1.5%, ProAssurance Corporation was 2.1%, SThree was 1.0%, CDON was 0.3%, Haemonetics Corporation was 0.5%, Cartrack Holdings was 0.0%, a2 Milk Company Ltd. was 0.3%, TKC Corporation was 0.8%

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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