Royce Global Value Trust Manager Commentary
article 06-30-2023

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 in Royce Global Value Trust 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”) increased 6.6% on an NAV (net asset value) basis and 6.8% on a market price basis for the year-to-date period ended 6/30/23 versus a gain of 8.0% for its unleveraged benchmark, the MSCI ACWI Small Cap Index, for the same period.

What Worked… and What Didn’t

Six of the Fund’s 10 equity sectors made positive contributions to performance in the first half of 2023, led by Industrials, Information Technology—which each made an outsized contribution—and Consumer Discretionary. The leading detractor by a wide margin was Communication Services, followed by Energy and Health Care. At the industry level, machinery (Industrials), electronic equipment, instruments & components (Information Technology), and construction & engineering (Industrials) made the biggest contributions while the leading detractor by a substantial margin was entertainment (Communication Services), followed by consumer finance (Financials), and life sciences tools & services (Health Care).

RGT’s top contributor at the position level was Vontier Corporation, which has a mixture of businesses. However gas stations and convenience stores are the predominant end markets around most of those businesses. The company provides technical equipment focused on the gas pump and supporting infrastructure, in addition to software offerings that are used at the pump, in the store, and as the backbone of attached car wash systems. The company also has businesses focused on areas such as automotive tools and electric vehicle charging. Vontier’s shares suffered throughout 2022 as investors appeared myopically focused on specific revenue declines that resulted from a major spending boom in gas pump payment terminals, which were driven by a shift in the relationship between gas stations and credit card companies. We felt this isolated event was masking management’s considerable capital allocation and execution success in its other businesses. As this issue receded from investor attention, its stock responded well as the strength of its fundamentals seemed to become clear. APi Group provides safety, specialty, and industrial services globally, though its focus is on North America. In May, the company announced record 2023 first-quarter results that included double-digit organic growth and expanded margins, a backlog near record highs, and vibrant activity across both its safety and specialty segments.

American streaming media and video-on-demand company, Chicken Soup for the Soul Entertainment, was the Fund’s top detractor in 2023’s first half. After reporting higher-than-expected losses that pushed its shares down in August of 2022, its stock price then fell more than 40% in March of 2023 after management announced a capital raise when also reporting net losses for the fourth quarter of 2022. Shares of South African financial services company, Transaction Capital, went into freefall in March of 2023 after the firm issued a profit warning and record losses. We held shares in each company at the end of June.

The Fund’s disadvantage versus its benchmark in the first half of 2023 was attributable to stock selection, most impactfully in the Communication Services sector, as well as in Health Care. Both our lower weighting and stock picks hurt relative performance in Consumer Discretionary. Conversely, our higher weighting in Industrials, lower exposure to Real Estate, and both stock selection and our lower weighting in Consumer Staples were all additive versus the MSCI ACWI Small Cap.

Top Contributors to Performance Year-to-Date Through 6/30/231 (%)

Vontier Corporation0.78
APi Group0.75
CIRCOR International0.73
Artisan Partners Asset Management Cl. A0.53

1 Includes dividends

Top Detractors from Performance Year-to-Date Through 6/30/232 (%)

Chicken Soup for the Soul Entertainment Cl. A-1.81
Transaction Capital-0.81
Mesa Laboratories-0.28
Pason Systems-0.28

2 Net of dividends

Current Positioning and Outlook

Fears of a global recession receded somewhat in June, led by positive economic data in the U.S. and a pause of interest rate increases by the Federal Reserve. Economic data out of Europe, as well as geopolitical tensions and a sluggish Chinese economy, all continued to weigh on the global economic outlook at the end of June. In this context, the near-term forecast for equities remains as unclear as any we can recall, though over the long term we also still see better weather on the horizon, especially for global small-cap stocks. Indeed, throughout 2022 and into 2023, we have been struck by the contrast between the more confident—albeit cautious—outlooks from the many management teams we met with, and the fatalistic headlines seen almost every day. We believe the Fund’s companies boast generally strong long-term growth prospects, low debt, positive free cash flows, high returns on invested capital, and/or proven management expertise. Overall, we believe 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. What we do know is history shows us that any recession—like any bear market—is ultimately finite and 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 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 06/30/23 (%)

RGT 2.676.825.152.483.664.18
XRGTX (NAV) 2.346.639.315.183.765.07

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, 2023, 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, 2023 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 6/30/23, the percentage of Fund assets was as follows: Vontier Corporation was 1.6%, APi Group was 2.5%, CIRCOR International was 0.0%, nLIGHT was 1.6%, Artisan Partners Asset Management Cl. A was 1.9%, Chicken Soup for the Soul Entertainment Cl. A was 0.4%, Transaction Capital was 0.2%, Biotage was 0.7%, Mesa Laboratories was 1.0%, Pason Systems was 0.9%.

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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