Royce Investment Partners: Insights and News

Beneath the Surface, the Market Is Changing… from Concentration to Participation

May 5, 2026 12:05:00 AM

Source: Furey Research Partners. Past performance is no guarantee of future results.

We see especially noteworthy evidence that this shift may be underway in how small-caps have been behaving during recent periods of stress and/or volatility. In 1Q26, small-caps demonstrated remarkable resilience amid a highly volatile backdrop. The Russell 2000 posted a modest gain of 0.9% while large-caps declined meaningfully, highlighting a historically rare divergence.

To be sure, this result is so compelling based on how infrequently the pattern has occurred. As we noted recently

Periods where dispersion increases alongside improving breadth have historically led to a wider range of outcomes between winners and losers. For active managers focused on fundamentals, this widening dispersal often presents a more compelling opportunity set, particularly in small-cap where business models, balance sheets, and earnings trajectories tend to vary more widely.

So, while the shift in market leadership away from narrow, mega-cap-driven results to broader participation has been creating more volatility, it has also historically expanded the opportunity set for active investors like us. Small-caps appear particularly well positioned given the combination of more attractive relative valuations, improving earnings prospects, and historically low expectations.

Stay tuned...

Important Disclosure Information

The performance data and trends outlined in this presentation are presented for illustrative purposes only. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements.

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.)

Royce Micro-Cap Fund Update and Outlook

Apr 28, 2026 12:04:00 AM

How did Royce Micro-Cap Fund perform in 1Q26?

Andrew Palen: The Fund advanced 9.2% for the quarter, outperforming both its benchmark, the Russell Microcap Index, which rose 1.5%, and the small-cap Russell 2000 Index, which was up 0.9% for the same period.

How did the Fund perform compared to the Russell 2000 over longer-term periods?

Jim Stoeffel:

AP:

What happened at the industry level in 1Q26?

JS:

At the sector level, what factors made the biggest impact relative to the Russell Microcap in 1Q26?

AP:

JS:

Despite these crosscurrents, we remain constructive on the micro-cap asset class. Our portfolio remains underpinned by durable thematic drivers, including reindustrialization, reshoring, and electrification. Our holdings in the supply chain supporting the buildout and densification of next-generation computing platforms and power generation assets are benefiting from multi-year project visibility. Further, we believe the vulnerabilities exposed by the current geopolitical landscape reinforce the burgeoning domestic capital investment cycle, which should continue to benefit our primarily domestic-oriented businesses. However, the principal near-term risk for our interest rate sensitive asset class remains simultaneous upward pressure on input costs and slower economic growth brought about by the prolonged disruption to the Strait of Hormuz.

Important Disclosure Information

Average Annual Total Returns as of 3/31/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Micro-Cap	9.23	45.42	17.76	7.62	11.53	10.83	12/31/91
Russell Microcap	1.49	45.78	16.88	3.13	10.36	N/A	N/A
Russell 2000	0.89	25.72	13.05	3.77	9.88	9.30	N/A

¹ Not annualized.

U.S. Small-Cap Market Overview

Apr 23, 2026 12:04:00 AM

The U.S. Small Cap Market Overview is a collection of charts that provides key takeaways from the quarter, including:

An overview of the major factors driving small cap performance
A historical perspective that puts current market conditions in context
Our market outlook, based on historical return patterns, which examines what future small-cap returns might look like

View Chartbook

Important Disclosure Information The thoughts concerning recent market movements and future prospects for small-company stocks are solely those of Royce Investment Partners, and, of course, there can be no assurances with respect to future small-cap market performance. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements.

Royce Small-Cap Fund—1Q26 Update and Outlook

Apr 21, 2026 12:04:00 AM

How did Royce Small-Cap Fund perform in 1Q26?

Lauren Romeo: The Fund advanced 3.9% for the quarter, outperforming its benchmark, the Russell 2000 Index, which was up 0.9%.

How did the Fund perform compared to the Russell 2000 over longer-term periods?

Jay Kaplan:

Andrew Palen:

What happened at the industry level in 1Q26?

Miles Lewis:

At the sector level, what factors made the biggest impact relative to the benchmark in 1Q26?

Steven McBoyle:

Francis Gannon:

Important Disclosure Information

Average Annual Total Returns as of 3/31/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	45YR	DATE	ANNUAL OPERATING EXPENSES
Small-Cap	3.90	24.81	12.38	6.49	10.86	11.39	N/A
Russell 2000	0.89	25.72	13.05	3.77	9.88	N/A	N/A

¹ Not annualized.

Small-Cap Opportunistic Value Strategy—1Q26 Update and Outlook

Apr 14, 2026 12:04:00 AM

How did the Small-Cap Opportunistic Value Strategy perform in 1Q26 and since the market low on 4/8/25?

Jim Harvey: We were very pleased with how Royce Small-Cap Opportunity Fund, the portfolio we manage in the Strategy, performed in both periods. The Fund advanced 6.4% in the quarter, beating its primary small-cap benchmark, Russell 2000 Value Index, which was up 5.0%, and the small-cap Russell 2000 Index, which gained 0.9%, for the same period. The first-quarter performance was especially satisfying considering how volatile and challenging a period it was. Most large-cap stocks were down, for example, as were most small-cap growth stocks.

From 4/8/25 through the end of March 2026, the Fund rose 59.4%, way ahead of both the Russell 2000 Value, which was up 46.6%, and the Russell 2000, which gained 43.6%, for the same period.

How has the Fund done versus its benchmark over longer-term periods?

Brendan Hartman:

Kavitha Venkatraman:

What happened at the industry level during the quarter?

Jim Stoeffel:

How did the Fund perform relative to the Russell 2000 Value on a sector basis in 1Q26?

BH:

What is your outlook for the Strategy?

JH:

BH:

Important Disclosure Information

Average Annual Total Returns as of 3/31/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	6.37	36.52	13.98	6.37	13.11	11.97	11/19/96
Russell 2000 Value	4.96	28.09	13.80	5.79	9.61	9.13	N/A
Russell 2000	0.89	25.72	13.05	3.77	9.88	8.39	N/A

¹ Not annualized.

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

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

The Royce Roundtable: How the Volatile Market is Creating Opportunities

Apr 7, 2026 12:04:00 AM

What were your thoughts on the first quarter of 2026?

Francis Gannon:

Chris Clark:

FG:

Miles Lewis:

FG:

Small-Caps Have Typically Beaten Large-Caps Following Deep Small-Cap Downturns
Russell 2000 3-Year Returns Subsequent to Russell 2000 Average Stock off 52-Week High Range from 3/31/97 through 3/31/26

Past performance is no guarantee of future results.
Batting Average refers to the percentage of periods in which the Russell 2000 Index outperformed the Russell 1000 Index.

As of 3/31/26, the average Russell 2000 stock was -29.4% off its 52-week high.

Brendan Hartman:

Which industries and sub industries have been hurt the most so far this year?

ML: IT services, and professional services were the areas where most of the pain has been concentrated. In Royce Small-Cap Total Return Fund

BH:

ML: I think the best example of a likely survivor is one that we've talked about recently, The Hackett Group. Hackett is an IT services company that specializes in benchmarking data and thought leadership around best-in-class systems and capabilities. Hackett is in the midst of a strategic pivot to better monetize its benchmarking data and institutional knowledge that has been built over the decades, ultimately moving from a project-based revenue model to one with a higher mix of recurring revenues and software capabilities. Its shares were down more than -33% in the first quarter and around -55% off its 52 week high.

(Nasdaq: HCKT)
12/31/25-4/2/26

Past performance is no guarantee of future results.

What do you own that has been working so far this year?

BH:

ML: The first area for our team is Industrials, where most of our holdings in more traditional areas have performed well so far this year. Next are Consumer Discretionary companies that cater towards the low-income consumer. Both Academy Sports and Advanced Auto Parts

(Nasdaq: ASO)
12/31/25-4/2/26

Past performance is no guarantee of future results.

(NYSE: AAP)
12/31/25-4/2/26

Past performance is no guarantee of future results.

We own a specialty chemicals company called Element Solutions, where 70% of its end markets are electronics companies, which are benefiting pretty significantly from AI but in an indirect fashion. Element provides the chemicals that go on printed circuit boards and data centers use bigger, more complex boards that require more of their chemistry, which is a big uplift in their business. That stock has done really well this year. So, tech, industrials, and a couple of pockets of consumer have been our top performers.

(NYSE: ESI)
12/31/25-4/2/26

Past performance is no guarantee of future results.

Are any companies you own benefiting by using AI for innovation and/or greater efficiency?

BH:

ML:

Is the earnings driven case for small cap leadership intact given all of the recent volatility in the market?

BH:

Where have you been looking for investments over the past couple of months?

BH:

ML:

FG: In Royce Small-Cap Fund Interparfums, which develops, distributes, and markets prestige fragrances under exclusive brand licenses and owned labels, and Quaker Houghton

What is your long-term outlook?

BH:

ML:

FG:

CC:

Important Disclosure Information

Average Annual Total Returns as of 3/31/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap	3.90	24.81	12.38	6.49	10.86	N/A	N/A
Small-Cap Opportunity	6.37	36.52	13.98	6.37	13.11	11.97	11/19/96
Small-Cap Total Return	-1.01	7.88	10.61	5.22	8.71	9.89	12/15/93
Russell 2000	0.89	25.72	13.05	3.77	9.88	N/A	N/A
Russell 2000 Value	4.96	28.09	13.80	5.79	9.61	N/A	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect each Fund's total annual operating expenses for the Investment Class as of each Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Funds through its investments in mutual funds and other investment companies.

Percentage of Fund Holdings As of 3/31/26 (%)

	Small-Cap	Small-Cap Opportunity	Small-Cap Total Return
Hackett Group (The)	0.4	0.0	2.4
	0.7	0.0	3.1
Advance Auto Group	0.5	0.9	2.7
Element Solutions	1.8	0.0	1.5
Interparfums	0.8	0.0	1.1
Quaker Houghton	1.0	0.0	1.0

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. The Funds invest primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. As of 3/31/26, Royce Small-Cap Total Return Fund also invested a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Funds may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

1Q26 Small-Cap Recap

Apr 1, 2026 12:04:00 AM

Facing Ample Uncertainty, Small-Caps Maintain Leadership

Amid High Volatility, Small- and Micro-Cap Remain in Front
1Q26 Russell Index Performance

Past performance is no guarantee of future results.

Small- and Micro-Caps Show Their Strength Off the Market Low

1-Year Russell Index Returns ended 3/31/26

Past performance is no guarantee of future results.

Foreign Affairs

Results for non-U.S. stocks aligned somewhat similarly with their stateside peers in 1Q26, with non-U.S. small-caps beating non-U.S. large-caps. The MSCI ACWI ex-USA Small Cap Index fell -0.5% in 1Q26 while its large-cap counterpart, the MSCI ACWI ex-USA Large Cap Index, lost -1.1%.

One-year results for both asset classes were noteworthy, with non-U.S. small-caps outpacing their large-cap counterparts. The MSCI ACWI ex-USA Small Cap advanced 27.8% in for the 1-year period ended 3/31/26 while the MSCI ACWI ex-USA Large Cap gained 24.2%.

Small-Cap Value Stays in the Black While Growth Sees Red

For the 1-year period ended 3/31/26, the Russell 2000 Value advanced 28.1% versus 23.6% for the Russell 2000 Growth. As is often the case, annualized results over longer periods ended 3/31/26 were a bit more mixed in terms of style leadership. Small-cap value was ahead for the 3-year (+13.8% versus +12.3) and 5-year (+5.8% vs. +1.6%) periods, while small-cap growth had a narrow advantage for the 10-year span, rising 9.8% compared to 9.6% for the small-cap value index.

Thanks to its strong absolute and relative performance over the last nine months, small-cap value assumed leadership off the April 2025 low: from 4/8/25-3/31/26, the Russell 2000 Value gained 47.9% versus a 42.0% advance for the Russell 2000 Growth.

The Small-Cap Sector Story: Energy and Industrials Were Positive in Small-Cap, Tech Leads in Micro-Cap

Cautious in the Near Term, Constructive on the Long Term

Looking at the state of play in the economy and geopolitics, we know it is easy for investors to feel discouraged or anxious. For our part, however, we have been struck by how many of the factors that can drive positive long-term returns and market leadership remain in place even in these volatile and unsettling days.

We also see an important shift in the AI trade that offers two possible ways to reward (in some cases keep rewarding) smaller companies. First, we anticipate that more investors will recognize how many small-cap companies are critical suppliers of the AI revolution, including (but not limited to) the semiconductor component makers that enable various AI applications, energy providers crucial to the functioning of data centers, and the construction companies building them. Second are those companies that are using AI to drive innovation, automation, and efficiency, which we think is a particularly promising long-term trend.

As we have noted previously, active management should be key to sourcing the smaller companies that are best positioned to benefit from these developments during an otherwise shaky market environment.

What Do Valuations, Earnings, and 5-Year Annualized Returns Suggest about Long-Term Small-Cap Performance?

Relative Valuations for Small-Caps vs. Large-Caps Remain Near Their Lowest in 25 Years
Russell 2000 vs. Russell 1000 Median LTM EV/EBIT (ex. Negative EBIT Companies), 3/31/01 through 3/31/26

Source: FactSet.

And as always, earnings are key. We have always subscribed to the adage that psychology runs the market in the short run (and 1Q26 gave us all a masterclass in that dynamic), but earnings run it in the long run. Earnings across asset classes were generally positive in 4Q25, with smaller companies generally faring best. Even more encouraging, the ongoing research we have seen forecasts better relative earnings growth for small-cap stocks in 2026.

One-Year EPS Growth

100% of the Time, Positive 3- and 5-Year Returns Have Followed Low Return Markets

Important Disclosure Information

The thoughts concerning recent market movements and prospects for small-company stocks are solely those of Royce Investment Partners, and, of course, there can be no assurances with respect to future small-cap market performance. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus prospectus. Investments in securities of micro-cap, small-cap, and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see "Primary Risks for Fund Investors" in the prospectus prospectus.)

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus prospectus.)

This Infrastructure Company Is a Quality Compounder

Mar 24, 2026 12:03:00 AM

In Royce Premier Fund, Co-Lead Portfolio Manager Steven McBoyle, Assistant Portfolio Manager Andrew Palen

Arcosa

Acrosa (NYSE: ACA)
12/31/25-3/20/26

Past performance is no guarantee of future results.

Current market forecasts call for a shortfall in utility structure capacity in 2027 and rising demand through at least 2030. Arcosa is addressing its capacity needs by using the weakness in its non-core wind tower business to bring an idled wind facility back online to produce utility structures beginning in the second half of this year. It also recently announced it will be converting another facility for utility production in 2028 after it fulfills its wind tower backlog.

Despite Arcosa approaching the late innings of its transformation phase, where it has refocused on its durable moat businesses that offer faster, less cyclical growth and higher ROIC, the company now trades several multiple points below those paid for similar businesses in private market transactions and of public peers. With its dominant positions in businesses with favorable secular demand tailwinds, we think Arcosa has a solid runway for attractive long-term organic growth and margin expansion, as well as ample high ROIC reinvestment opportunities to pursue when it resumes acquisitions in the aggregates space.

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	1.35	5.63	10.05	5.56	10.34	10.83	12/31/91
Russell 2000	2.19	12.81	13.73	6.09	9.62	9.34	N/A

¹ Not annualized.

Average Annual Total Returns as of 2/28/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	13.30	19.68	11.39	6.43	12.17	11.18	12/31/91
Russell 2000	6.20	23.34	13.14	5.05	11.30	9.49	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 12/31/25 (%)

	Premier
Arcosa	3.9

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

How Micro-Caps Can Stay on Top

Mar 17, 2026 12:03:00 AM

Royce Micro-Cap Fund, variable annuity portfolio , and closed-end fund Royce Micro-Cap Trust.

Ongoing significant investments in AI spending also helped to fuel this upswing, and our investable universe of micro-cap stocks includes many companies selling into the AI supply chain. While this includes obvious areas such as semiconductor equipment companies, it also reaches a much broader universe of industrial, energy, and power related stocks that will continue providing the picks and shovels for the AI revolution.

Of course, several risks bear watching, the most glaring being mounting geopolitical risks, not just in the Mideast but across the world. Investors are rightfully focusing on the disruptions to oil supplies from the current military action in Iran, but the sheer magnitude of the potential human cost and the possibility for unexcepted consequences could also pressure political stability in some regions as well as global economic growth more generally.

Similarly, the increasing stress related to private debt held in private equity funds is another concern. Whether it is a harbinger of a broader credit cycle issue that might negatively affect the public banking sector is an open question. It may seem odd, but the extent to which credit risk remains broadly confined to private equity could prove beneficial to micro-caps because private equity is a key competitor for capital within the space.

Here are three holdings in which we have long-term conviction, two that are benefiting from AI spending and one from reindustrialization:

ADTRAN Holdings

As with many of our investments, we think fiber-optic networks are critical to the long-term success of AI technology investments and expect ADTRAN to benefit accordingly. In addition, BEAD spending targeting broadband access to underserved areas is just beginning to flow into telecom spending patterns. While the company has significant cash, a meaningful outstanding obligation to minority shareholders associated with a large acquisition has been an overhang to the stock price, keeping multiples at levels we find attractive. We expect this obligation to ultimately be manageable. In the meantime, it has given us an opportunity to build our position.

ADTRAN (Nasdaq: ADTN)
12/31/25-3/13/26

Past performance is no guarantee of future results.

Bowman Consulting Group provides engineering and design services across several verticals, including building infrastructure, transportation, power utilities, energy services, and natural resources. Bowman neatly fits our thesis that there is a wide range of service providers that will benefit from the rapid buildout of AI data center infrastructure. In addition, Bowman sits at the sweet spot of government spending from both the IJJA and OBBBA.

In 3Q25, the company had a small earnings miss that in our opinion unduly pressured its share price. We used what we saw as a temporary shortfall to reinitiate a position. With its low-debt balance sheet, robust free cash flow characteristics, and a proven track record of successful acquisition integrations, we see Bowman as well positioned to take advantage of a potentially attractive acquisition market. Its valuation is still below historical norms on a price-to-sales and price-to-cash flow basis, making Bowman a highly attractive investment opportunity in our estimation.

Bowman Consulting Group (Nasdaq: BWMN)
12/31/25-3/13/26

Past performance is no guarantee of future results.

Lincoln Educational Services

Lincoln Educational Services (Nasdaq: LINC)
12/31/25-3/13/266

Past performance is no guarantee of future results.

We will continue to use our core approach, where we use multiple investment themes that give us wide exposure to companies with strong fundamentals and/or prospects selling at what we think are attractively low valuations. Despite how well micro-caps have performed over the last several months, we are still seeing what we think are promising long-term opportunities.

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Capital Micro-Cap	2.72	13.89	15.42	9.17	10.14	9.86	12/27/96
Micro-Cap	1.83	13.33	15.30	9.24	10.43	10.62	12/31/91
Micro-Cap Trust	2.47	16.57	15.55	8.85	12.23	10.92	12/14/93
Russell Microcap	6.25	22.98	15.20	7.32	9.58	N/A	N/A
Russell 2000	2.19	12.81	13.73	6.09	9.62	N/A	N/A

¹ Not annualized.

Average Annual Total Returns as of 2/28/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Capital Micro-Cap	15.25	39.10	17.38	8.83	12.50	10.34	12/27/96
Micro-Cap	15.75	39.02	17.23	9.01	12.95	11.04	12/31/91
Micro-Cap Trust	17.22	43.30	19.44	9.28	14.90	11.41	12/14/93
Russell Microcap	6.73	38.65	15.22	4.65	11.68	N/A	N/A
Russell 2000	6.20	23.34	13.14	5.05	11.30	N/A	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 12/31/25 (%)

	Capital Micro-Cap	Micro-Cap	Micro-Cap Trust
ADTRAN Holdings	0.8	0.8	0.8
Bowman Consulting Group	0.2	0.2	0.2
Lincoln Educational Services	1.1	1.0	0.0

This material is not authorized for distribution unless preceded or accompanied by a current prospectus prospectus prospectus prospectus.)

Growth Market Dynamics

Mar 12, 2026 12:03:00 AM

This transcript has been edited for clarity.

Francis Gannon: Hello everyone and welcome to another episode of the Royce Exchange. I'm happy to be joined by portfolio manager Chip Skinner and analyst Will Collopy from our very successful Smaller-Companies Growth strategy. And we want to spend some time talking about the growth opportunities within the small cap space. But Chip, perhaps we could start with what we've seen happening from a rotational standpoint in the market so far this year, after what was a very successful year last year for small cap growth in general, value has really started to show strength this year. We've seen a bit of a rolling AI correction, if you will, through technology and healthcare in different areas of the market and it's really affected the overall performance of the Small Cap Growth Index, which is only up 3.7% through the end of February on a year to date basis versus small cap value which is up close to 9%. What are your thoughts on what's happening in the rotational aspect of the market that you're seeing from a growth perspective?

Chip Skinner: Well, thanks Frank. I might start back in 2025, which as you mentioned, was a good year for small cap growth. However, if you dig beneath the covers, it was quite a roller coaster year in terms of quarterly performance. We were sort of unpleasantly surprised with the administration's tariff announcement the first half of the year that caused a serious correction in the small cap growth segment in particular, as people worried about, what that meant for GDP and inflation and, relations with other countries, etc., etc., and fortunately there was a pretty swift bounce back I think before that the first half was over, so it was a bit of a white knuckle, first half of the year, and I think that was because the recovery was due to the fact that there was a view that maybe the tariffs didn't have as many teeth as people had thought. The impact might not be as severe, and maybe it was just a way to get trading partners to the to the negotiating table. As people got comfortable with that outlook, the third quarter was a very speculative quarter in terms of performance, at least from my viewpoint. Many of the very early-stage areas that may relate to Bitcoin or early-stage biotech companies, there's a whole segment called quantum computing where a lot of early-stage companies have very large market capitalizations. There was a period where a number of those less established companies were outperforming and a lot of us you know meaningfully underperformed in the third quarter. Then it seemed like we got overdone there and, life kind of returned to more of a normal state when the more traditional small-cap growth institutional investor names began to outperform again in the fourth quarter. So, even though it looked like a great quarter, there was a lot of anxiety and ups and downs in 2025.

Frank: How much do you think in that third quarter speculative moment was driven by the Fed and easing by the Federal Reserve to help these companies that are probably carry a lot of debt?

Chip: Many of them don't have debt and actually have a lot of cash which makes an investor more comfortable, even though they may not have revenues or profitability.

I do think the rate environment and rate expectations had a lot to do with the third quarter. The economy in general has been pretty stable. It's been growing, employment has been pretty solid, inflation has been under control even with the tariff discussions, and so I think the backdrop economically has been very favorable to the extent people seem to be changing their view on whether we're in an up-rate environment or down rate environment every so often. My personal view is, we probably are in a stable to maybe declining interest rate environment. I think that's partly to do with the fact that there will be a new Federal Reserve Chair appointed. There will be a lot of pressure to keep rates low.

Frank: Fast forward to this year--you've seen kind of the typical engines of growth, and I mean growth by those that are identified within the growth you know tend to be more growthy, as opposed to value, have faltered a little bit, specifically healthcare and technology, as the ramifications of AI rips through different parts of the overall economy. What's changed and how is that affecting how you're viewing the world?

Chip:

Frank: Spend some time talking about AI. It seems to be, you know, everyday we're dealing with it. The ramifications of it the fear over the possibilities of it, et cetera.

How are you as a growth manager thinking about AI in your respective portfolio companies?

Chip: It's a good point because one of the reasons technology has underperformed this year has been the software sub sector of technology, enterprise software.

Frank: I've heard you often talk about these long trend changes that you try to tap into, themes, if you will. What are you looking at today that you would consider to be some of those long trends?

Chip:

Frank: Will, is there a particular theme that you're interested in as well?

Will Collopy:

Frank: Yeah, I've always been a believer that innovation is not the sole province of the large cap space everybody talks about how wonderful, innovative, all these great businesses are, but obviously you've identified a lot of different areas that innovation is changing how things are being done. I'm curious, how does a growth manager approach the small-cap asset class?

Chip: It's a broad question. I would say that there are a number of ways to do that. We tend to have a longer term horizon for our investments in the portfolio, we're looking for companies that ideally we can own for a long time and some of our better performer names have been multi-year outperformers, and in some cases really unique companies that are creating a new industry and are dominating that industry. We refer to these types of companies as Amazons. They do what Amazon has done successfully, they've taken an innovation, which is online, retail purchasing and, built an entire huge business around it. There are lots of buckets of small-cap stocks out there, as you know, there are thousands of companies in the universe, but it's our job to narrow down that list and not focus on the ones that might be in the very early stage, startup stage. We want to not focus on the ones that have hit maturity and that are not, you know, growing, maybe even slowing down, and focus on the ones that are either slightly early in their multiyear growth cycle that are experiencing an inflection in their growth rate because of maybe some new products or something has changed in the business, or longer term holdings that we refer to as GARP--growth at a reasonable price. And so the combination of those categories is really what our sweet spot is.

Frank: Will?

Will: I feel like there's been a ton of companies in the small-cap space that have grown from being very small companies to being much larger companies, and it really fits into our investment philosophy of, you know, companies moving from developing into the GARP cycle into, you know, potentially an Amazon over the long run. Just attacking a huge, huge market.

Frank:

Important Disclosure Information

The thoughts and opinions concerning the stock market are solely their own as of the recording date and, of course, there can be no assurance regarding future market movements. Their opinions may differ from the opinions of portfolio managers, investment teams or platforms at Royce Investment Partners. The performance data and trends outlined in this recording are presented for illustrative purposes only. No assurance can be given that the past performance trends as outlined in this recording will continue in the future. Historical market trends are not necessarily indicative of future market movements.

This podcast is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Royce Investment Partners. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Royce Investment Partners managed portfolio.

Past performance is no guarantee of future results.

Small-Caps Roll On Amid Increased Volatility

Mar 10, 2026 12:03:00 AM

Small- and Micro-Caps in the Lead
Russell Index Returns, 4/8/25-3/6/26

Past performance is no guarantee of future results.

Our investment playbook has not changed. We remain focused on fundamentals and seek to use periods of volatility opportunistically to build positions in high-quality small-cap businesses with long runways for growth. Whether uncertainty subsides or reemerges in another form, our discipline, process, and long-term time horizon remain constant. Finally, we think that periods like the present reinforce the value of active management, as heightened volatility typically increases dispersion beneath the surface, making careful security selection all the more impactful for the days ahead. In fact, active small-cap management has an impressive track record during periods of higher volatility, as shown in the chart below.

Is Higher Volatility Good for Active Management?
Percentage Active ¹ Beat Russell 2000 Within Volatility Levels, Monthly Rolling 5-Year Average Annual Return Periods 12/31/78 through 12/31/25

¹

Source: Morningstar

Important Disclosure Information

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.)

Why Banks, Snacks, and Sporting Goods Are Quality Value Opportunities

Mar 3, 2026 12:03:00 AM

There are six conditions that we think are especially favorable for small-cap banks now:

First is the steeper yield curve. Most regional banks draw the bulk of their income from spread income. The steepening yield curve has led to growth in spread income which in turn is leading to improved profits for a number of small-cap banks.
Deregulation is another important factor. Smaller banks usually lack the scale to absorb new regulations that larger banks do, so as regulations are being relaxed, smaller banks receive a bigger benefit.
is also helping. We are seeing this dynamic play out in two ways: some smaller banks are being acquired at attractive selling prices while others are making what we think are smart acquisitions.
Valuations
Promising earnings, which are a significant positive in their own right and relate favorably to currently attractive valuations. On average, small-cap banks are trading for less than 10x projected earnings per share (EPS) for 2027 versus 20x EPS for the broader market next year.
AI. One of the reasons we like our small-cap bank holdings is that they are established in the geographies they serve. These banks are still very much person-to-person businesses where the bankers know their customers well, and they differentiate themselves by emphasizing relationships and personal service. In this context, we see AI as eventually helping these companies as administrative processes and regulatory work become increasingly automated.

Of course, there are risks. As we noted back in November

There are two holdings that exemplify the attributes we look for. Home BancShares

Towne Bank

Beyond banks are two other companies in which we have long-term conviction. The first is

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Total Return	1.15	2.43	11.82	8.82	9.37	10.01	12/15/93
Russell 2000 Value	3.26	12.59	11.73	8.88	9.27	9.47	N/A
Russell 2000	2.19	12.81	13.73	6.09	9.62	8.89	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds and other investment companies.

Percentage of Fund Holdings As of 12/31/25 (%)

	Small-Cap Total Return
Home BancShares	1.9
TowneBank	1.7
	2.9
	2.1

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus

Micro-Cap Asset Class

Mar 2, 2026 12:03:00 AM

This transcript has been edited for clarity.

Francis Gannon: Hello and welcome back to the Royce Exchange.

This is Francis Gannon Co-CIO of Royce Investment Partners.

Our focus today is on the micro-cap asset class, which represents a unique segment of the public equity markets, characterized by small, often underfollowed companies with significant long-term growth potential. I've always been fond of saying that the small-cap asset class are the forgotten asset class, but I would argue that micro-caps are even more forgotten if possible. That was, at least until last year, when micro-caps outperformed for 2025 as a whole, outperforming the Russell 2000, the Russell 1000 and even the top 50 names in the Russell as well by a significant amount.

Joining me to break down some of the opportunities in the micro-cap asset class are portfolio managers James Stoeffel and Andrew Palen, each of which has significant experience in this area. Let's just start off by defining micro-caps. How do you guys think about the asset class, Jim?

Jim Stoeffel: Technically, the way we think about it is, we look at the largest stock within the Russell Microcap Index, which right now I believe is about $1.3 billion dollars. Candidly, and to your point, Frank, about looking for companies that we think can grow and become bigger companies, we tend to think about stocks maybe smaller than that because we want them to grow out of being a micro-cap. Our average micro-cap stock right now is about $700 million dollars. So, we're about 50% below where our maximum could be because we want stocks to move up. And then we have a fair amount of stocks that are really super small, you know, under $100 million, $50 million, $60 million. And those are interesting equities because if they're successful, they become really, really big stocks and they become really, really big contributors to performance. The risk obviously being that when you're that small, you lack scope and scale and if you make one bad decision, it tends to be pretty ugly. So, we tend to think about, from an investment perspective, running pretty diversified portfolios that we can go after some of the really small things that can be, you know, 5 or 10 baggers or whatever the number is. But generally, and Andrew, you can correct me, I would think sort of $500 million to $700 million is sort of our sweet spot of companies that have gained scope and scale but still provide a significant amount of opportunity.

Frank: Andrew, could you spend a second talking about some of the inefficiencies in the asset class and therefore some of the opportunities?

Andrew Palen: As you alluded to, things start from a point of even just less institutional sponsorship, whether that's on our side of the table with investors who are following the companies speaking to management and really having a dialogue about company strategy, I think you'll find lots of companies are going about their way without the same kind of oversight from investors that larger companies have, even down to brokers and research and just general dissemination of information about what the company is doing and what they're planning on doing. I would also note that the companies are making investments. On that last point, I'd say the companies are making investments with longer term horizons, and it's not showing up in numbers.

Frank: And then narrowing it into the way you view the world within micro-caps, what differentiates your approach? How do you look at the asset class and therefore how do you invest in it?

Jim:

Andrew:

Frank: Spend a second on that if you will, in terms of how do you mitigate risks? You've already talked a little bit about the number of names you might own within the Strategy. But, how about from a individual company standpoint? How do you mitigate risk?

Jim:

Andrew: Adding on to what Jim's saying, I think another important factor is the ability to admit we've been wrong. You can control for sizing pretty easily. You're dealing with riskier situations in micro-caps. I think it's important to know, iteratively following these companies and sort of knowing when things are going in the wrong direction. I'd say this this sort of general dynamic, even up through small-caps, where I think the risk reward in the returns you see going from average businesses that are headed towards good businesses, can be a much more attractive risk reward or trying to invest in businesses that are trying to remain great because you have more attractive going in valuations and often there are misunderstood things about the business that play out over sufficiently longer time horizons where you can see consistent reinvestment opportunities or other things that that make it a better long term investment.

Frank: This idea of emerging quality, if you will.

Andrew:

Frank: So, I guess taking all of that into account, does your process lead you to certain sectors of the market and away from certain sectors of the market, Jim?

Jim: The thing that makes small-caps and then in particular micro-caps work is earnings growth. And you need relative earnings growth relative to Mag 7 or whatever else it's going to be to have decent performance. So, you want the tailwind of earnings growth. We do tend to be pro-cyclical because we want that tailwind of cyclical growth to help us. If it works, it's great. If the investment case doesn't work, you've got some tailwind that'll protect you as opposed to constantly going after stocks where you have some sort of major headwinds without cyclical growth. We definitely have a pro-cyclical bias. We're overweight industrials, we're overweight tech. We tend to be underweight biotechs, because there tends to be not a lot of underlying earnings support to the business. And if you get it right in terms of their particular product, that's great, but it tends to be a little binary. Over the course of five years, that's OK. Over the course of a year or two, that might not be great. And we tend to be a little bit underweight, banks. Again, banks are relatively efficiently priced asset, and so they never get overly cheap unless you have a financial crisis. So, you should think about what we do as being generally pro-cyclical. We're not trying to invest in companies that aren't making money, and sometimes we get those wrong. We're looking for companies that are going to be bigger. We want to sell companies because they become $4-, $5-, $6-, $7-, $8-, $9-, $10-billion-dollar companies because we got them right. And that's really the underlying gist of what we're trying to do is to find companies that we think have a strategy that will allow them to become small and smid-cap stocks, and we're happy to sell those to other people to when we get them right.

Frank: It's really interesting. I think the micro-cap asset class here at Royce is part of our research DNA, right? I think we follow companies through certain life cycles and understanding them while they're micro-cap companies has been, kind of, one of the keys to our long-term success. How often do you see small micro-cap companies grow up if you will, to become small-cap companies?

Jim: That's where we're trying to add value is through identifying these stocks that are going to become small-cap stocks and that's how we approach the portfolio. So, we have these stocks that we get right, they run up and they become not micro-cap and then we start harvesting that capital to reinvest at the bottom of the portfolio where, you know, they're still smaller, the investment case hasn't been proven, and where we think the risk reward is significant and maybe 10% upside, 90% downside or with 10 times upside or whatever 90% downside. So, if you look at what we have done relative to how we manage the portfolio, we have a very significant number of stocks at the top of the portfolio that are not micro-cap, or that we've earned that through fundamental research and understanding how micro-caps work.

Frank: You both mentioned the importance of meeting with management teams on a regular basis and the consistency of what you're hearing from them and what are you asking them? What are you looking for? Is there some commonality in most of those discussions?

Andrew: One thing I'd highlight that we haven't discussed has been that, you know, there's a lot of discussion these days thematically. And a lot of what we're seeing in the sort of cyclical businesses that are tied to the economy and to the broad industrial capacity buildout that we've been seeing, you know, with thematic drivers like onshoring deregulation, electrification, kind of next generation manufacturing infrastructure. That very much applies to our companies as well. A lot of the discussion is about the big tech giants or the big industrial giants and what they're seeing. but when we're speaking to our companies, they're very much seeing these types of drivers and are the underlying component suppliers that builds up to these larger themes. I think a lot of the conversations we're having are about, I mean at this point, investments made 2, 3,4 years ago are coming online and driving the business and becoming meaningful business drivers and value drivers for the companies as we go forward.

Frank: Jim?

Jim: Andrew's got it right. The way to think about a lot of our companies is, we're selling the picks and shovels into the broader universe. And if you look at the supply chain around AI, it's one of the broadest supply chains I've ever seen in my life. We're trying to figure out where we can find opportunities in a theme that we think is 100% true and make money. The big topics of the day are obviously AI, that's a that's a multi-pronged sort of issue. The first is, is AI spending in a bubble? And we don't think so yet, but it could get there for sure. And then the next one is how are companies going to harness AI to generate, you know, returns for their businesses? And that's obviously one of the first questions you ask every management team is, how are you harnessing AI to make your business a better business? The tariff issue is obviously, well, it has been front and center. It feels like it's dying down a little bit. But from the micro-cap and small-cap perspective, that was a problem because these companies had to make investment decisions, based on a very uncertain environment and I feel like we're through that. The geopolitical situation has become challenging, and that adds an element of Black Swan type risk that we're thinking a lot about. Then the regulatory environment, Frank, which you which you touched on, which I think has gotten shoved to the side a little bit with everything that's going on, but the regulatory environment has clearly gotten better, which is good for our companies. With the exception of the geopolitical stuff, everything seems to be either good on the regulatory front or a little bit less bad, say on the tariff front. The economy remains pretty strong. You have a lot of stimulus in the pipeline right now, whether it's the great Big, Beautiful bill or even the Biden administration's Jobs Act money is just starting to flow. You had something called the BEAD Act, which was targeted towards telecom, and there's also a lot of money in the system. So, I think the environment's pretty good for the economy. Things feel pretty good right now candidly, but knock on wood, I don't like to jinx myself.

Frank: There are so many myths about small-caps and micro-caps, right?

One of them, I think is around capital allocation; is capital allocation for companies that are micro-cap different than small-cap?

Andrew: I'd say that the capital allocation process is more capital starved with more frequency. When businesses are sub scaled there'll be periods where the business has more capital available, and there are periods where capital is more scarce, and so it breeds different business cultures, different executive behaviors.

Capital allocation is, you know, I'd say as important as it could be with businesses that have de-risked their balance sheet or diversified the business.

You know, this gets back to the point that incremental investments that the companies are making are more meaningful to the enterprise value of the business.

So, yeah, I would say capital allocation is important and that's something that we can investigate first hand. Speaking to these companies that are less covered or have perception gaps, and that's a source of differentiated returns for the Strategy.

Frank: Perhaps an unfair question to ask, but how do you think investors should position micro-caps in their thought process or in their portfolios?

Andrew: I think a lot of the discussion that we've had so far has been about cyclical drivers, thematic drivers and broader takeaways, lack of institutional sponsorship, or you know, a perceived underweight allocations with investors. I think I'd also highlight just the overlooked things. There are plenty of businesses that operate in fragmented markets and still have the growth runway or business quality that you might find in larger-caps, but we're getting them at more attractive valuations with the bigger opportunity for the re-rating evaluation and potentially attractive runways for those business returns. And so, I'd highlight that as a way to get differentiated exposure in investor allocation.

Frank: Yeah, I agree. I think having the right approach to help mitigate risk for the best risk adjusted returns going forward, I think, particularly in this asset class is really helpful. Jim, anything to add there?

Jim:

Frank: We get a lot of questions about private equity. How is private equity affecting microcaps?

Jim:

Andrew: One of the fastest growing areas within private equity has been private equity secondaries. And I think I'd also highlight that dynamic, which has been ongoing, which is, really given the developed nature of the asset class with increasing frequency, these transactions are between sponsors, and so it doesn't involve public companies. I think that also drovea lot of the conversation the last couple of years with the valuations which these transactions are happening in the markets.

Frank: Sure, the public markets wouldn't pay those valuations is the big difference which is fascinating. But anyway I appreciate both of your time today and thank you for enlightening us all about micro-cap asset class.

Jim: Thank you.

Important Disclosure Information

The views expressed are those of the speakers and the comments, opinions and analyses are rendered as of the date of this podcast and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, security or strategy. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.

Past performance is no guarantee of future results.

Quality Small-Caps and the “Urge to Merge”

Feb 24, 2026 12:02:00 AM

acting as an acquiror from private equity sellers that desired liquidity. Several months and three interest rate cuts later, we are seeing additional Premier Fund holdings demonstrating a similar strategic pendulum swing. After a period when public companies were often targets for take-private transactions, some portfolio holdings have shifted decisively to the offensive, serving as essential liquidity providers for the private equity ecosystem.

Two recent transactions highlight these strategic advantages, with private equity sellers offering companies at attractive values to Quality Compounders:

Headquartered in Toronto, Colliers International Group is a global diversified professional services and investment management company that operates through three businesses: Commercial Real Estate, Engineering, and Investment Management.

It is also worth noting that Colliers has been active as an acquirer from private equity players over the last few years. Colliers bought Englobe from mid-market private equity firm Onex for $475 million in June or 2024 and acquired Triovest, a leading Canadian commercial real estate services platform, from Coril Holdings in April of 2025.

ESAB Corporation

The Premier team, which consists of Co-Lead PM Lauren Romeo, Assistant Portfolio Manager Andrew Palen

Kadant, a global supplier of technologies and engineered systems that play integral roles in enhancing efficiency, optimizing energy utilization, and maximizing productivity, acquired Austrian firm Bohler from the large industrial group voestalpine AG. This deal gives Kadant a critical supplier that it had targeted for years to secure specialized, patented processes.

Installed Building Products (IBP) made three acquisitions recently that totaled more than $22 million in annual revenue and were consistent with its bolt-on approach to acquisitions. On 12/11/25, IBP acquired CKV Finished Products, while Biomax Spray Foam Insulation was acquired on 1/19/26, and Thermo-Tech Mechanical Insulation was acquired on 2/2/26.

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	1.35	5.63	10.05	5.56	10.34	10.83	12/31/91
Russell 2000	2.19	12.81	13.73	6.09	9.62	9.34	N/A

¹ Not annualized.

Average Annual Total Returns as of 1/31/2026 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	10.19	13.38	9.47	7.74	12.17	11.11	12/31/91
Russell 2000	5.35	15.81	12.20	6.16	11.21	9.48	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 12/31/25 (%)

	Premier
Colliers International Group	3.3
ESAB Corporation	3.0
Kadant	1.4
Installed Building Products	1.7
Ayesa Engineering	0.0
Eddyfi Technologies	0.0
Bohler	0.0
CKV Finished Products	0.0
Biomax Spray Foam Insulation	0.0
Thermo-Tech Mechanical Insulation	0.0

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Manager Commentaries

Feb 18, 2026 12:02:00 AM

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Important Disclosure Information

prospectus prospectus prospectus.)

Royce Capital Fund–Micro-Cap Portfolio Manager Commentary

Feb 18, 2026 12:02:00 AM

Fund Performance

Royce Capital Fund-Micro-Cap Portfolio advanced 13.9% in 2025, trailing the 23.0% gain for its benchmark, the Russell Microcap Index, for the same period. Relative results were better over longer-term periods as the portfolio beat the benchmark for the 3-, 5-, 10-, and 25-year periods ended 12/31/25.

Our top contributor was nLIGHT

LightPath Technologies

Astronics Corporation supplies flight critical electrical power, inflight entertainment and connectivity, lighting and safety, and test solutions to the aerospace, defense, and mass transit industries. The company holds a dominant market share in in-seat power systems for commercial aircraft. Accelerating activity levels related to improving aircraft production rates and ramping defense contracts drove its stock price performance in 2025. With more than two-thirds of revenue related to commercial aircraft, split close to equally between line fit and retrofits, Astronics will also benefit from airline fleet updates. We believe that sustained progress with process efficiencies and portfolio simplification will further benefit its through-cycle earnings power.

Sprott

CECO Environmental offers highly engineered systems and process solutions that safeguard people, the environment, and industrial equipment across niche applications, including the industrial air treatment and management, water treatment, and energy transition end-markets. The company has installed more than $10 billion of equipment across 4,200 customers. Its stock outperformed as CECO continued to deliver record backlog at record quarterly run-rate revenues amid tariff and government shutdown uncertainty, owing to continued momentum in the construction of power generation, water treatment, and semiconductor infrastructure. Electrification, reshoring, and the buildout of advanced manufacturing are sustaining a broad-based demand environment.

Ichor Holdings

PAR Technologies

Lakeland Industries

QuinStreet

It was a very strong year for the asset class, as the Russell Microcap outperformed each of the major domestic indexes. Micro-caps were particularly strong off the early April bottom, rising 63.5% from 4/8/25-12/31/25. Both sector allocation and stock selection hurt, with the former detracting most. At the sector level, both stock selection and a much lower exposure to Health Care hurt relative results most and by a wide margin. The bulk of our underperformance, both in the sector and for the Fund as a whole, was attributable to our underweight in biotechnology and pharmaceuticals, two industries that tend not to fit our investment philosophy and which had significant moves following the April bottom. While we are always thoughtful and deliberate about sector weightings, we believe that staying true to our investment philosophy is critical to long-term term success, even when it causes relative performance issues in the short-term. Also hampering relative results were our higher weighting and stock selection in Consumer Discretionary and a lower weighting and stock selection in Energy. Conversely, stock selection and, to a lesser extent, our lower weighting in Financials, stock selection in Communication Services, and stock selection along with a lower weighting in Consumer Staples were each additive versus the Russell Microcap in 2025.

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Current Positioning and Outlook

]]> Important Performance and Disclosure Information

Important Performance and Expense Information

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, 2025, 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, 2025 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.

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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.)

5 Factors That Can Drive Small-Cap Earnings Growth

Feb 10, 2026 12:02:00 AM

Small-caps have lagged for much of the past several years as higher interest rates, rising costs, and narrow, mega-cap market leadership all worked to compress valuations and mute earnings visibility. This dynamic, however, is beginning to shift. Year-to-date, small-caps have outperformed large-caps, and since the market low on 4/8/25, the Russell 2000 has risen more than 50%, outpacing the Russell 1000, which gained around 40% over the same period. And while sentiment has improved, valuations remain discounted, and fundamentals are starting to turn.

One important driver is the interest-rate environment. Small-cap companies typically carry more leverage and have greater exposure to floating-rate debt than their large-cap peers. As financial conditions become less restrictive, interest expense tends to fall more quickly for smaller companies, leading to a disproportionate benefit to earnings. This pattern has been evident in prior easing cycles, when small-cap earnings growth accelerated relative to large-caps, often before the improvement was fully reflected in consensus estimates.

At the same time, the reshoring of supply chains remains a durable structural trend. As manufacturers prioritize resilience and proximity over lowest-cost production, demand continues to shift toward domestic suppliers and specialized service providers. Many small-cap companies occupy compressed but critical positions in these ecosystems and directly benefit from incremental domestic investment, unlike multinational firms whose exposure is more diffuse.

Technology adoption is another supportive factor not yet appreciated by the market. Most impactfully, AI is no longer confined to large-cap platforms. For smaller companies with lean cost structures and high operating leverage, even incremental productivity gains can have an outsized impact on margins, creating a pathway to earnings growth that does not rely solely on revenue acceleration, a distinction that becomes increasingly relevant as the economic cycle matures.

Taken together, these factors point to an improving earnings environment for small-cap stocks at a time when valuations remain well below large-cap levels. This is not a case for indiscriminate exposure, however. Dispersion within the small-cap universe remains high, and balance sheet strength, pricing power, and management skill continue to matter.

Important Disclosure Information

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.)

Annual Letter: When Will Small-Cap Reach the Summit?

Feb 3, 2026 12:02:00 AM

How a Year of Uncertainty Became a Year of Double-Digit Returns

likely to be succeeded by Kevin Warsh.

Micro-Caps Reach the Peak of a Resilient Market

An Impressive Year for Stocks of All Sizes
Russell Index Returns, 12/31/24-12/31/25

Past performance is no guarantee of future results

AI: Coming Soon to a Small-Cap Company Near You?

Small-Cap Opportunities Beyond AI

Of course, our investment teams see many opportunities in areas that lie outside AI, including businesses in the Consumer Discretionary and Consumer Staples sectors. There have also been interesting opportunities in Health Care beyond the biopharma complex, which dominated small-cap performance in 2025. Elsewhere, they have been investing in industries such as packaging, business services, and insurance, all of which appear poised to do well in 2026. Green shoots can be seen in the non-AI parts of the semiconductor chain, along with companies involved in manufacturing, where industrial distributors, to take one example, are starting to experience stabilization at the bottom of the business cycle. Opportunities have also been found in diverse areas such as commercial and professional services, transportation, and capital markets.

Revenge of the Forgotten Asset Classes?

Russell Index Returns, 4/8/25-1/30/26

Past performance is no guarantee of future results

With regard to micro-caps specifically, returns for the asset class are often a barometer of risk. To the extent that investors remain comfortable with less liquidity and are willing to take risks, micro-caps should do well. Equally important, there are higher-quality micro-cap companies, and if the market continues to broaden out as we expect, more of these micro-caps should participate as the leadership baton within small-cap as a whole passes from more speculative stocks to more established, quality companies with more proven, durable business models.

Why Small-Cap, Why Now

Do Earnings + Valuations = Sustained Small-Cap Leadership?

In our view, by far the most compelling case for small-cap leadership in 2026 comes from a relatively rare and promising confluence of factors: Relatively low valuations for small-cap versus large-cap and the forecast for higher earnings for small-cap companies. Even after a year of robust returns, valuations for the Russell 2000 at the end of 2025 were still quite close to their lowest levels versus the Russell 1000 in 25 years, using our preferred index valuation metric of EV/EBIT or enterprise value over earnings before interest and taxes.

Relative Valuations for Small-Caps vs. Large-Caps Remain Near Their Lowest in 25 Years
Russell 2000 vs. Russell 1000 Median LTM EV/EBIT (ex. Negative EBIT Companies), 12/31/00 through 12/31/25

Source: FactSet

One-Year EPS Growth

Past performance is not guarantee of future results.

VIEW FUND PERFORMANCE

Important Disclosure Information

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. The performance data and trends outlined in this article are presented for illustrative purposes only. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements. Investments in securities of micro-cap, small-cap, and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see "Primary Risks for Fund Investors" in the prospectus.) Investments in foreign companies may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic, or other developments that are unique to a particular country or region. (Please see "Investing in International Securities" in the prospectus.)

Small-Cap Premier Quality Strategy—4Q25 Update and Outlook

Jan 27, 2026 12:01:00 AM

How did the Small-Cap Premier Quality Strategy perform in 4Q25 and over longer-term periods?

Steven Mcboyle: The mutual fund we manage in the Strategy, Royce Premier Fund, advanced 1.4% for the quarter, lagging its benchmark, Russell 2000 Index, which was up 2.2% for the same period. The Fund gained 5.6% in 2025 versus a 12.8% gain for the benchmark. Longer-term relative results were better. The Fund outperformed the Russell 2000 for the 10-, 20-, 25-, 30-year, and since inception (12/31/91) periods ended 12/31/25 and trailed for the 5-year period.

Lauren Romeo:

Andrew Palen:

What happened at the industry level in 4Q25?

LR:

Which position contributed most in 4Q25?

SM: Our biggest contributor in the second quarter was MKS

Which position detracted most in the quarter?

LR: That would be FirstService Corporation

How did the Fund perform compared to the Russell 2000 on a sector basis in 4Q25?

AP:

How did the Fund perform at the sector level for the calendar year?

LR:

What were the biggest industry contributors and detractors in 2025?

SM:

Which holding contributed most from performance in the calendar year?

AP: Our top contributor at the position level in 2025 was MKS, which we discussed above.

Which holding detracted most in 2025?

LR: Our top detractor was medical technology company, Enovis Corporation

AP:

What is your outlook?

LR:

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	1.35	5.63	10.05	5.56	10.34	10.83	12/31/91
Russell 2000	2.19	12.81	13.73	6.09	9.62	9.34	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 12/31/25 (%)

	Premier
MKS	4.2
FirstService Corporation	3.0
Enovis Corporation	0.0

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Royce Small-Cap Total Return—4Q25 Update and Outlook

Jan 20, 2026 12:01:00 AM

How did Royce Small-Cap Total Return Fund in 4Q25 and over longer-term periods?

Miles Lewis: The Fund

How did performance shake out at the sector and industry level in 4Q25?

Joesph Hintz:

Which holding contributed most in 4Q25?

JH: PACS Group

Which holding detracted most in the fourth quarter?

Jag Sriram: Our top detractor was automotive aftermarket parts provider, Advance Auto Parts

At the sector level, how did the Fund perform versus its benchmark?

JH:

How did the Fund perform at the sector level in the calendar year?

ML:

What were the biggest industry contributors and detractors?

JS:

Which holding contributed most in 2025?

JH: Just as it was in the fourth quarter, PACS Group was our top contributor in 2025.

Which holding detracted most in 2025?

ML: Our top detractor was Vestis Corporation

ML:

What is the outlook for the Fund?

ML:

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Total Return	1.15	2.43	11.82	8.82	9.37	10.01	12/15/93
Russell 2000 Value	3.26	12.59	11.73	8.88	9.27	9.47	N/A
Russell 2000	2.19	12.81	13.73	6.09	9.62	8.89	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds and other investment companies.

Percentage of Fund Holdings As of 12/31/25 (%)

	Small-Cap Total Return
PACS Group	2.0
Advance Auto Parts	2.9
Vestis Corporation	0.0

Royce Small-Cap Fund—4Q25 Update and Outlook

Jan 13, 2026 12:01:00 AM

How did Royce Small-Cap Fund perform in 4Q25?

Lauren Romeo: The Fund advanced 2.0% for the quarter, narrowly trailing its benchmark, the Russell 2000 Index, which was up 2.2% in 4Q25.

How was performance for 2025 as a whole?

Miles Lewis:

How did the Fund perform compared to the Russell 2000 over longer-term periods?

Jay Kaplan:

Andrew Palen:

What happened at the industry level in 4Q25?

Steven McBoyle:

At the sector level, what factors made the biggest impact relative to the benchmark in 4Q25?

Miles Lewis:

Steven McBoyle:

What about at the industry level?

ML:

AP:

Francis Gannon:

Important Disclosure Information

Average Annual Total Returns as of 12/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	45YR	DATE	ANNUAL OPERATING EXPENSES
Small-Cap	1.95	8.95	13.90	8.38	11.11	11.45	N/A
Russell 2000	2.19	12.81	13.73	6.09	9.62	N/A	N/A

¹ Not annualized.

2025 in Review

Dec 18, 2025 12:12:00 AM

This transcript has been edited for clarity.

Francis Gannon:

I'm happy to be here today with two of our portfolio managers, Chip Skinner, who's been with the firm for 22 years, has over 40 years of industry experience, and is our portfolio manager for our Smaller-Companies Growth Strategy, and Joe Hintz, who joined us a little over 4 years ago now, has over 10 years of experience in the industry, and works as a portfolio manager on our Small-Cap Quality Value Strategy.

I thought it'd be fun to talk about the year. It's been a really interesting year. Small-caps have faced numerous challenges from the start of this year, from uncertainty over tariffs and the resumption of Fed cuts to a continued push out recovery. In terms of the earning story, which I think is starting to change a little bit and that earnings recession has kind of been there for a period of time as well. But I'd love to get your thoughts on some of the aspects of the market that we've seen this year around small-caps, Chip perhaps let's start with you. What are your thoughts on some of the volatility that we've seen this year?

Chip Skinner: Thanks for having us. I've described this year as a small-cap growth manager feeling a little bit like a pinball in a pinball machine. There has been a lot of volatility. If I roll back the camera a little bit, The first quarter was a negative quarter, The Russell 2000 was down about 10%, and that was precipitated by the big new tariff regime that was announced. Small-cap stocks declined about 25%, believe it or not, from their recent peak.

So, there was a big correction in there. Interestingly, there was a big bounce back in the second quarter. We almost recaptured the entire 10%. Third quarter, another scenario where we had a lot of the speculative sort of categories or sectors of the small-cap universe really outperform things like crypto, quantum computing stocks, and a number of other areas where there's not a lot of revenues, not a lot of earnings, or any earnings.

For a traditional small-cap, long term investor, which was a difficult quarter to keep up with frankly. But then more recently in this current quarter, there has been somewhat of a return to more normal performance of some of the high quality long term growth companies that we invest in, so it has been a somewhat of a milkshake this year it seems like.

Francis:

Biotech has been on fire this year post the tariff tantrum, if you will, on April 8th, but would love to get your thoughts on some of the volatility you saw in the market this year.

Joe Hintz: Thanks for having me on the program today. Appreciate the time to chat. Similar to what Chip said, interesting start to the year. We actually had a good Q1 in a down market and then the rip off the bottom after the tariff announcement has been extremely challenging for quality value managers.

No matter how you look at it, whether it's factors or the types of companies that have been outperforming, it's just been a very, very difficult market for quality managers. You've seen it in biotech, Chip mentioned crypto, you've got the Bitcoin miners. There's even a company in the index that's not supposed to have revenues, I think, until 2027 or 2028 that was one of the top contributors in the index this year. So, when you have that type of an environment where you have not even non earners but non-revenue companies in a small-cap value index leading the market, that's just a significant challenge.

Francis: Joe, history shows that you do see these lower quality kind of stocks rip off the bottom and then quality does come back. You see those better companies come back usually a year after. Where are you seeing opportunities along that line today? Do you think that's going to happen #1? and #2, how are you guys positioning yourselves going into 2026?

Joe:

As we head into 2026 I think there are lots of different places to look for opportunity. First, starting from a macro perspective, taking a step back and thinking about what I just talked about around the bifurcated market and bifurcated economy. We have seen areas of the market that have been in a quasi-recession for a long time. The low-end consumer has been in a recession arguably for several years now. The industrial patch has been quite weak. There are parts of the semiconductor chain that have been weak outside of AI.

We're starting to see potential green shoots in some of those non-AI parts of the economy, which would be very, very positive for breadth in the market to see non AI companies starting to accelerate off the bottom of a cycle. We're seeing some green shoots in parts of the semiconductor chain, we're seeing in some of the regional fed data around manufacturing that we're starting to see some potential green shoots there. Some of the results from our industrial distributors, for example, are starting to see some, at a minimum, stabilization at the bottom of a cycle, and potentially some nice green shoots moving to the other side to the upmarket part of the cycle.

In general, we are hopeful that we're going to see some broadening out of the market. It's been tough for quality value. The other area where we see a lot of opportunity is where companies have been thrown out as if they're going to be AI losers, for example, even though we see a lot of opportunity there. We have an IT services company, it's been a very difficult year for this stock, one of our worst performers this year, but that's basically all come from multiple contraction, meaning that the market has gone from pricing this from a viable business to a melting ice cube business, and we think that the market's doing that because they think that it's going to be an AI loser and that their business model is in jeopardy. We think the exact opposite. We think that there's a lot of opportunity for this company to expand in an AI driven world and we think that as we move away from the picks and shovels phase of the AI build out to more of the true adoption by enterprises phase, this particular company is going to really, really benefit in helping enterprises drive AI adoption. So that's just kind of a smattering of areas where we see opportunity heading into next year.

Francis: Chip, just kind of building a little bit on that. When you think small cap growth, you think tech spending and those companies that are going to be beneficiaries of tech spending around AI, etc. You talked about quantum computing earlier. How are you thinking about in positioning the strategy going into 2026?

Chip: As you might expect, we have a higher mix of technology as well as healthcare companies. It's interesting because every company is going through some kind of a digital upgrade and spending on technology, and some of that will depend on how strong the economy is. But there's some real, as Joe pointed out, AI type areas or initiatives that are going to require a lot of capital spending and investment because I do believe that eventually this is going to change the way a lot of us work and a lot of the products that companies sell; every product will probably have embedded in it some form of artificial intelligence. The way we're positioning and the way we have for some time been positioning is by trying to identify some very long term, durable themes that will generate some of these new, world beating companies and actually new areas of the economy.

So, there are a lot of exciting innovations going on out there. We have a number of themes like this one that are generating some meaningful outperformance opportunities.

Francis:

Chip:

Francis: Joe, any thoughts on it?

Joe

So, what does that mean, Agentic AI? We're just basically talking about going from chat bots where you interact with the model through the chat interface to building out automated workflows to automate business processes. I think we're very early days in that, and that's been delayed by a year just by the complexity of doing this. But I think it is definitely coming. And so that IT services company that I mentioned, they're going to help companies build out agentic workflows.

In terms of seeing AI coming to the small-cap near you, if you want to take the baseball analogy where we haven't even hit the first inning yet, we're in the warm up phase. I think some of the larger companies, to Chip's point, are a little further along. You've started to see some interesting examples. So, I know this year it's been pretty widely reported across the news that healthcare costs are going up, whether it's because of weight loss drugs, higher acuity services being used, etc.

But healthcare costs are very much on the rise. And one interesting thing that I heard from one of our companies that is not in the healthcare space specifically, but has some exposure there is that hospitals are now using AI to better code because I think in the past, maybe because the coding system for different procedures is so complex, maybe something is missed and so the hospital doesn't bill the correct amount, and so you're now seeing AI being used to expand the hospital billing code, not in an illegal way, but just to make sure that the hospitals are getting paid for the procedures that they're performing. That is a big contributor apparently to some of this rise in healthcare costs. You know, I think that's just one example of an industry using AI to extract the requisite value that they had been missing out on in past years. Those are the types of things that we will start to see expand out into the economy going forward. Hospital systems, a lot of these are very large systems. Maybe they can afford to invest in that kind of stuff, maybe they're a little bit ahead of the game, but I think that type of thing will be coming to all industries across the U.S. heading into the next year for sure. As of right now, we are not hearing any of our companies talking explicitly about how much AI is helping them either to grow the top line or save on the bottom line.

Joe: We're maybe in a stance of potentially cautious optimism. One thing that does concern us is that the second Trump administration has brought a lot of unprecedented change, whether it's the massive scale up in tariffs, the significant change in immigration policy, etc. And I think we're only beginning to really see the true impacts of or potentially we're only beginning to see the impacts of these policies.

Maybe tariffs will completely not impact inflation in any major way. We're not macro investors, so it's hard for me to tell you for sure, but, you know, I definitely think heading into 2026, there could be some inflationary impacts that were delayed in terms of us seeing them in actual data but that starts to come through, and then also labor being much tighter now because of much tighter immigration policies. I think that's really going to impact areas like construction, home building, agriculture, etc. Those are areas where tighter immigration policy will impact things, and to what extent those things are impacted is to be determined. But there is definitely a lot of uncertainty as the country goes through some significant changes. That's the caution piece of cautious optimism.

I think the optimism side is something I alluded to earlier where we are seeing some green shoots from an economic perspective. AI has been the main driver of the economy for several years now. We are very hopeful that we're starting to see that expand out into industrials, into the non-AI parts of the chip economy, etc. A further expansion of the economy where you're seeing us coming out of some slower periods for a lot of these other parts of the market would be very, very positive just for the health of the market, the breadth of the market. And then lastly, I would just say that we are hopeful. I mean here at Royce we've done the research. It is common to see low, low-quality lead off the bottom in a market rally, but that transition should happen 6 to 12 months out, and that's where we are heading into 2026. So, I would expect to see quality regain leadership in terms of the types of companies that are really leading the market.

Francis: Chip, how about you?

Chip:

So, if we have that combination of fiscal spending and lower interest rates, that typically is a pretty good backdrop for businesses in general for anyone who's going to borrow money to spend or invest in a project, and particularly for small- cap performance. So, I'm pretty bullish about the potential for that backdrop. Now longer term, there are some consequences. There's probably higher inflation and certainly more federal government debt that will have to be addressed at some point, but I think next year, that's what I'm thinking.

Francis: Yeah, I agree with you. One of the more interesting things out of that tax bill that was signed earlier this year is the fact that you can have 100% depreciation on research and CapEx, so you could see a great CapEx cycle begin, which would be wonderful for small-caps that I don't think the market has really come to grips with yet at all.

Perhaps the last question for you both before we go is, what was something that you read within the past year that people should pick up and read because I think we spent a lot of our time reading stuff. But, we never think of, this is a great piece. What's something you would recommend people read?

Chip:

Francis: Joe, last word.

Joe: Similar to Chip, I think obviously most of my time is spent reading about the companies that we're invested in and the industries that we're invested in and looking at. For the reading that I do outside of work, I think one of the most interesting books I read a little over a year ago now was a book called Endurance by Alfred Lansing. It's about Ernest Shackleton's 1914 expedition down to Antarctica, where they got stuck in the ice for, I think it was about two years. It's a story of survival in an extreme expedition type environment, and it's just a fascinating book. The reason I mention it is that I think it's an interesting book just to think about leadership, which is always an interesting topic for anyone who's interested in business. And just his ability to rally his crew through just unbelievable circumstances and survive. It's just an ultimate tale of survival and heroism and ultimately leadership and getting people through just unbelievable circumstances. So, just a fascinating read period. But I thought it had some implications to business to a certain extent from a leadership perspective.

Francis: Great. Well, thank you both. Till next time. Thank you.

Important Disclosure Information

Past performance is no guarantee of future results.

What’s Next for Small-Caps in 2026?

Dec 16, 2025 12:12:00 AM

Miles Lewis:

We also see one development that will surprise investors in 2026: Small-caps will outperform! The long, dark winter of small-cap underperformance has been exhaustively documented and is well understood. We think 2026 could be the year that small-caps reassert themselves.

Chip Skinner: We are constructive on small cap growth stocks as we head into 2026, primarily due to the accommodative fiscal and monetary policies of the current administration. The speculative activity that characterized the early part of the fourth quarter has since faded, and we are encouraged by a broadening in positive earnings revisions as macro headwinds continue to ease.

We also expect the consumer to remain resilient, with stable employment data trends contradicting some of the more negative headline narratives. Valuations for small-caps remain discounted relative to their large-cap counterparts, and earnings expectations are still conservative in our view, leaving room for positive revision momentum. While we are constructive on the year ahead, we recognize that the benefits of aggressive fiscal spending and lower rates may carry longer-term trade-offs in the form of renewed inflation pressures and widening budget deficits.

Kavitha Venkatraman:

Based on our recent conversations with company management teams, we think spending will pick up in 2026 and drive economic growth. We consequently expect a positive inflection in hiring by small businesses, which should help employment-related stocks. Further, we anticipate that this investment cycle will drive continued robust demand for power, which should benefit a wide swath of the energy and industrial businesses we own in our Small-Cap Opportunistic Strategy.

Steven McBoyle:

Francis Gannon:

Important Disclosure Information

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds and other investment companies.

Prospectus.) Please read the prospectus carefully before investing or sending money. Fund investments in foreign securities may involve political, economic, currency, and other risks not encountered in U.S. investments. Funds that invest a significant portion of their assets in a limited number of stocks may involve considerably more risk than more broadly diversified portfolio. A broadly diversified portfolio, however, does not ensure a profit or guarantee against loss. (See "Primary Risks for Fund Investors" in the respective prospectus.) Please read the prospectus carefully before investing or sending money.

AI in Investing

Dec 10, 2025 12:12:00 AM

We are excited to be bringing you podcasts featuring timely investment insights from our team of investment professionals. You can also find our podcasts on Amazon Music, Apple Podcasts, and Spotify as The Royce Exchange,

This episode has been edited for clarity.

Frank Gannon: Hello and welcome everyone. This is Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners. Thanks for joining us. AI and how it's changing the world of investing is a topic we have spent an enormous amount of time on over the past several years here at Royce and its effects on the small cap asset class we find to be particularly interesting as well as its effects on the companies we invest in. The speed of change has been impressive as to have been the benefits. From our perspective, artificial intelligence is transforming the investment research process.

And as you will see, it is empowering analysts to identify trends and risks that might go unnoticed, unnoticed more effectively, freeing them, from our perspective at least, to spend more time on some higher valued insights.

Joining me in this conversation today are two members of our investment team that are on the forefront of how AI is becoming a critical part of our research capability and to be quite honest, a competitive edge. Joining me are Assistant Portfolio Manager Tim Hipskind and Senior Analyst Zach Weiss.

Guys, I think this is a fascinating and a huge topic. But Tim, perhaps you could start with a bit of a conversation around the evolution of AI and the theme here at Royce.

Tim Hipskind: The evolution has really been amazing to watch. So, what started out in I believe November 2022 of when ChatGPT kind of came into the zeitgeist and Zach and I started using it heavily just for a small cap analyst. It was very helpful at the time to just kind of have simple questions answered at whatever level of complexity you needed. We own a spintronic sensor company and to have some of the nuances of that explained to you was very helpful. That was kind of the beginning, just basic chat bot, ask a question, get an answer, before you might spend time on Google or call a sell side analyst. This allowed you to just get up to speed and learn things a lot quicker.

And it just seems like every three months since then, there's just been dramatic evolutions in what you've been able to do. The next big step was the reasoning models, which just allowed for a whole new level of, for lack of a better term, thinking by the robots. The depth of their output just increased dramatically. That opened up a lot of new use cases from a research standpoint. The other thing that came along at the same time as that reasoning model was the sourcing or the ability to search the Internet and provide sources back to you of what it was saying. Obviously, a big thing we'll get into is the hallucination risk. And early on there's a lot of questions around, hey, it'll say there's four Rs in strawberry or whatever, right?

Frank: So, you keep hearing this concept of your digital brain. How has your digital brain changed?

Zach Weiss: Thanks for having us Frank. I think just overall the encouragement of the Royce management since the advent of AI came about encouraging us to use these tools and get smart and super grateful to work right next to a guy like Tim for the last 3 1/2 years and be able to spitball back and forth on how the stuff has been working. For me, it's kind of just like having a super smart sidekick that knows everything about everything on my side at all times. I have to be a little careful because in a lot of ways. AI can give me answers that I want to hear depending on how I ask the questions. So, a big part for me has been developing the way that I prompt the system to get certain answers.

Tim: And if I could just add on this question of digital brain. We started out where you had an incredibly smart friend sitting next to you, and it was like Swiss cheese. There were some kind of holes in the knowledge, but you had this really smart person with you all the time that you could kind of bounce ideas off of.

Frank: But spend a second about your daily workflow and how that has changed, because I think that's kind of key to understanding how this is helping you. You've talked about running the smart person next to you, but how exactly are you doing that?

Zach: The day-to-day varies depending on whether we're at a conference or earnings or just kind of the general research pipeline that we're working on here day-to-day in the office. In each one of those aspects, there've been ways that we're kind of leveraging the tools. So, for example, if I'm going to a conference and there are 300 companies on the attendee list. Before I would have to manually go through each company attending the conference and say which one should I book a meeting with? Where now I can feed the list through AI and say, which of these companies are worth meeting based on our investment strategy? And then prepare for those meetings.

So, before maybe I only had the capacity for six meetings in the day, now I can do 12 and ask smarter questions based on the ability for AI to help me prepare for those. I think previously, if one of the portfolio managers prescribed me a stock to look into for a for a Strategy, it would be kind of maybe waiting a few days to before having booked a call with a sell side analyst or reading through the 10-K, and now I can kind of have a prescribed list of questions that I know that they would want to have answered and effectively just kind of speed up the process and allow me to go deeper and look at more things.

Earnings season always gets pretty busy around here and historically, we still do manually listen to each earnings call and take notes. But while I'm maybe listening and taking notes on a company that we own, I can have AI analyze the way that I'm prescribing it. All of the competitors and constituencies that might impact the company that we own in a portfolio to give us maybe a more holistic view.

Tim: One example I'll stick with is the earnings season motion. Obviously, it's one of our busiest times and this last earnings season I really tried to commit to see what can I throw at AI and see what sticks in terms of having the process evolve or work better.

Frank: How has it changed your conversations with management teams?

Tim: Before, if I wanted to know the pricing of a specific commodity that's relevant to a company, a lot of the times, especially in small-cap companies, there's not a universal index I can go check that price at. So, you could do some channel checks. You could try to find other ways to find sources of information that are relevant, but it would often be challenging. With the reasoning models I mentioned earlier, really Chat GPT's version, the model O3, the ability to search the entire Internet and pull out data points that you would have had to spend weeks finding before has really been revolutionary.

For example, the pricing of lime, there is a PPI index for it, but it's generally kind of an opaque price, but it is used in a lot of municipal water departments, so there are public bids. For the first time I realized, oh, I can just have ChatGPT go pull a bunch of public bids for lime pricing, and I can even see the specific companies, the bidding, the pricing and the dates. You can think of a bunch of examples like that where the ability to just find things that before would have taken an incredible amount of time, or you just would never have found has increased.

I think we're kind of shocking managements with the level of depth you can go to these days.

Zach: I would echo Tim. This is probably one of the more fun aspects of where we see AI come up in our jobs, at least for me. For example, we have a company that a couple of quarters ago reported in their press release really the core of what we do as research analysts and portfolio managers is predominantly the same, but the tools, the breadth and depth that we can do it with and the speed is the biggest game changer.

Frank: Let's turn to the small-cap asset class. It's the forgotten asset class of late. Everybody's focusing on the upper end from a market cap perspective. It's, I think, one of the last inefficient asset classes out there. We know there's very little analyst coverage on many of the companies that we spend our time on. How is AI helping you round the asset class and specifically what we focus our lives on around here?

Tim: That's been a huge benefit. To your point, Frank, some of the portfolios here have close to 50% of the companies that have no analyst coverage at all, and then you can imagine maybe they have one or two analysts covering some of the others. So, the ability to build sort of a digital analyst that can do a very lightweight version of coverage on these companies is something that's really interesting. And so, one of the things that I did initially through an application called Cursor, which is really just an amazing thing in its own right, but it allows someone like me who has very limited coding experience to build applications and actually get output from them. One of the first things I did was just build an 8-K summarizer. I took a test population of 10 companies that we theoretically could own that have no analyst coverage. And can I build something that summarizes the 8-K whenever they put one out. That was kind of an eye-opening experience because yes, you can, and it can do a really good job.

Zach:

Having tools that we have available now to sort of get ahead with respect to any type of insights that might lead to different investment outcomes, I think is really beneficial. There are companies that are in harder to understand industries, and if there's no sell side coverage, it can be hard to get smart on what exactly these companies do.

It's amazing how many inefficiencies still exist in the small cap space. You can have companies where there's meaningful changes going on that the market is not necessarily catching on to yet, where with the breadth and depth that these tools allow us to get to, might help flag more opportunities than we would have been able to find before.

Frank: At the same time, though, there's enormous misconceptions about AI, right? And I think there's a fear at times about AI and how to implement it and how we should use it. Have you guys thought about that or how that's affecting your day-to-day?

Tim: It's definitely something we think about.

Frank: Let's be honest, AI is wrong at times.

Tim: Yeah, absolutely. And so, the biggest thing that has helped with that is the sourcing of information when you get the responses. You can oftentimes click the link to see where ChatGPT came up with this information? So, that's very helpful. The other thing that I've done is within the background of the AI tools, when I talk to them, I have it tag every statement it says to me with high, medium, or low confidence, which I've found helpful in understanding when is it freestyling a little bit versus when does it have something directly it can point to. So good prompting helps out a lot with that, but there is no getting around it. It's been described as a jagged edge of intelligence, so you have to be careful. It's obviously not something we're relying on wholeheartedly, but to Zach's point, it kind of gives you ammunition to get smart on things before you might go talk to a management team or then go do your diligence in, you know, all the ways that we do that. So, there are definitely risks, but the benefits are just so tremendous. You have to kind of find ways to work with the risks.

Zach: Some other misconceptions that come to mind for me. One in particular is people often talk about the job security that AI or the job risk that AI might pose and that we're all going to be out of work since AI has come into the forefront, just because I can do a lot more stuff, it definitely makes the job more fun. I was getting a haircut yesterday and the barber was kind of defending her job because it was protected from AI. I still think there's a lot of fear out there with respect to job security, and I just continue to explore and play around with the tools to the extent that they can be useful.

With respect to the hallucination risk, it definitely is a real one with AI and there are hallucinations that existed before AI. Tim and I could be in a meeting with the CEO and could walk out of the meeting having heard two different things. That's the importance of having a team dynamic. There have been situations where I've generated something that has helped influence my thoughts on a company, and I've sent it to our team. They'll point out a mistake that's in there and it's a dose of humility. The AI made a hallucination and I'm really glad the team member was able to point out the mistake. Fortunately, those types of checks and balances exist to help mitigate the downside with respect to the mistakes that AI can make. But I also think back to whether it's a sell side analyst who was wrong on a particular trend or a company was wrong. Management teams can be very optimistic with respect to business outlooks. Before AI came about, I think that's just part of the nature of the business is mistakes. Mistakes are going to be made and I think just the extent that we can have checks and balances to mitigate that is important.

Frank: I'm fascinated by the speed at which it's occurring, I mean go back two years or three years ago to where we are today and what AI is able to do. It's fascinating and you can only imagine what it's going to be three years from now, let alone three months from now.

Tim, I mean you speak a lot about this, you know, the speed at which this is changing. We hear a lot about agents and things like that how is that going to be changing the investment world, do you think?

Tim:

For example, person X has this task they have to do and there are 100 people X. 70% of the people do it this way, and it takes 10 minutes to resolve, 30% of the people do it this way and it takes half an hour to resolve. And so, this has been this long field of study where they would take this business process mining, take it to the executives and say, hey, here's how we think you can alter your workflow. In terms of the future of work, we're seeing all these people who have naturally found themselves in the AI world. You hear a lot now about workflows and about how you have to really think about your job, what workflows do you break that up into and where does it make sense after you've mined those processes to tack on an LLM or AI as an addition to your workflow or where can you fully outsource things like summarization?

That's one of the things I've really been thinking about a lot in terms of the workflows and how you optimize them and how do you edit those for better outcomes.

Zach: I have one thing I could add to the future one other additional tool that hasn't really come to the forefront, yet I think it's kind of like a portfolio aid that can give PMs real time insights on weightings or bit buys or sells instead of me running down to a PMs office and saying hey there's insider buying at XYZ company to have a real time alert for them to incorporate into their decision making process. More recently, we have access to a more secured version of AI where we can be more comfortable with our proprietary data that we've amassed. It seems like there's a lot of low hanging fruit to maybe improve investment decisions or at least serve as another pair of eyes that that didn't exist before.

Frank:

Zach: Thanks for having us.

Tim: Thanks.

Important Disclosure Information

The thoughts and opinions concerning the stock market are solely their own as of the recording date and, of course, there can be no assurance regarding future market movements. Their opinions may differ from the opinions of portfolio managers, investment teams, or platforms at Royce Investment Partners. The performance data and trends outlined in this recording are presented for illustrative purposes only. No assurance can be given that the past performance trends as outlined in this recording will continue in the future. Historical market trends are not necessarily indicative of future market movements.

The views expressed are those of the speakers, and the comments, opinions and analyses are rendered as of the date of this podcast and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, security or strategy. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.

Past performance is no guarantee of future results.

Two Theme-Based Small-Cap Opportunities

Dec 9, 2025 12:12:00 AM

The Small-Cap Opportunistic Value Strategy that we use in Royce Small-Cap-Opportunity Fund invests in companies that Lead Portfolio Manager Brendan Hartman, Portfolio Managers Jim Harvey and Jim Stoeffel, and Assistant Portfolio Manager Kavitha Venkatraman categorize into four themes: Turnarounds, Unrecognized Asset Values, Undervalued Growth, and Interrupted Earnings. In this piece, Brendan and Jim Stoeffel discuss an Unrecognized Asset Value stock, and a Turnaround opportunity.

NPK International

NPK International (NYSE: NPKI)
12/31/2024-11/20/2025

Past performance is no guarantee of future results.

Winnebago Industries

Winnebago Industries (NYSE: WGO)
12/31/2024-11/30/2025

Past performance is no guarantee of future results.

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	12.93	13.95	17.67	16.93	12.63	11.89	11/19/96
Russell 2000 Value	12.60	7.88	13.56	14.59	9.23	8.99	N/A
Russell 2000	12.39	10.76	15.21	11.56	9.77	8.42	N/A

¹ Not annualized.

Average Annual Total Returns as of 11/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	0.12	3.88	11.28	11.45	11.72	11.82	11/19/96
Russell 2000 Value	3.07	3.02	9.17	10.51	8.66	9.05	N/A
Russell 2000	2.79	4.09	11.43	7.99	9.12	8.48	N/A

¹ Not annualized.

The thoughts and opinions of Mr. Hartman and Mr. Stoeffel concerning the stock market are solely their own and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

Percentage of Fund Holdings As of 9/30/25 (%)

	Small-Cap Opportunity
NPK International	0.7
Winnebago Industries	0.3

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

Two Key Positions in Our Small-Cap Opportunistic Value Strategy

Dec 2, 2025 12:12:00 AM

The Small-Cap Opportunistic Value Strategy that we use in Royce Small-Cap-Opportunity Fund invests in companies in which Lead Portfolio Manager Brendan Hartman, Portfolio Managers Jim Harvey and Jim Stoeffel, and Assistant Portfolio Manager Kavitha Venkatraman have identified a catalyst for future earnings growth in the form of new management, a more favorable business cycle, product innovation, and/or margin improvement. In this piece, Kavitha and Jim focus on two holdings that have earned their long-term confidence.

Amentum Holdings

(NYSE: AMTM)
12/31/24-11/28/25

Past performance is no guarantee of future results.

Mayville Engineering (NYSE: MEC) is a U.S.-based contract manufacturer, providing a broad range of prototyping and tooling, production fabrication, coating, assembly, and aftermarket services. The largest fabricator in the U.S., Mayville operates 26 plants across nine U.S. states. Manufacturing is 100% domestic and roughly 92% of the direct materials the company uses are sourced domestically. Contract pricing passes tariffs through, which helps insulate earnings before interest, taxes, depreciation and amortization, or EBITDA, while OEMs (original equipment manufacturers) reshore and consolidate suppliers.

(NYSE: MEC)
12/31/24-11/28/25

Past performance is no guarantee of future results.

Management is running a fairly simple playbook: Lean operations, price discipline, and thoughtful capital deployment. Mayville launched a footprint optimization in early August to consolidate three warehouses and one manufacturing facility by the end of 2026, a total charge that will run somewhere in the neighborhood of $5-$7 million. Near-term charges flow through the costs of goods sold, but the objective is fixed-cost relief and better utilization aligned to DC/CP growth.

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	12.93	13.95	17.67	16.93	12.63	11.89	11/19/96
Russell 2000 Value	12.60	7.88	13.56	14.59	9.23	8.99	N/A
Russell 2000	12.39	10.76	15.21	11.56	9.77	8.42	N/A

¹ Not annualized.

Average Annual Total Returns as of 11/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	0.12	3.88	11.28	11.45	11.72	11.82	11/19/96
Russell 2000 Value	3.07	3.02	9.17	10.51	8.66	9.05	N/A
Russell 2000	2.79	4.09	11.43	7.99	9.12	8.48	N/A

¹ Not annualized.

The thoughts and opinions of Ms. Venkatraman and Mr. Harvey concerning the stock market are solely their own and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

Percentage of Fund Holdings As of 9/30/25 (%)

	Small-Cap Opportunity
Amentum Holdings	0.5
Mayville Engineering	0.4

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

In Defense of Small-Cap Banks

Nov 25, 2025 12:11:00 AM

In fact, many of the future potential credit issues have migrated beyond the regulated banking industry into the shadow banking system of private credit. Private credit largely consists of direct loans made by non-bank entities such as private credit funds, asset managers, and hedge funds. These loans typically offer higher interest rates and are frequently used in financing leveraged buyouts, which means they allow borrowers take on much more leverage.

Of course, it is impossible to know when these credit issues will begin to materially impact banks, regardless of size. But when the market begins to price in credit risk again, it is likely going to once more shoot first and ask questions later, with most, if not all, banks in the crosshairs. And despite their relative lack of exposure to NDFIs, we suspect that smaller community and regional bank stocks will be hit hard, as they were in October.

Of the banks we hold in the Fund, here are three of our highest-quality positions, each of which has minimal, if any, NDFI exposure:

Glacier Bancorp (NYSE: GBCI) is a regional bank with operations in Montana, Idaho, Utah, Washington, Wyoming, Colorado, Arizona, and, more recently, Texas. Although they have more than $29 billion in assets, they operate as a collection of small community banks in their markets. Glacier has an outstanding deposit franchise, enabled by their strong market share in smaller markets that the larger banks choose not to focus on. For example, they are the #1 bank in Montana with a more than 20% market share (which is high for a bank), while Wells Fargo, one of only two large banks with a top 10 market share in the state, is #4 at less than 9%. This strong market share gives Glacier one of the lowest cost of deposits in the banking industry.

German American Bancorp

TowneBank (Nasdaq: TOWN) is headquartered in Portsmouth, VA, where it has a dominant share of 36% in the Hampton Roads area. Towne also has a small but growing presence in the fast-growing N.C. market. As a traditional bank, Towne is outstanding in its own right, with a long history of pristine credit, impressive returns on assets and on tangible common equity, solid growth, and a very attractive deposit franchise.

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Total Return	4.86	5.42	15.59	13.57	9.45	10.05	12/15/93
Russell 2000 Value	12.60	7.88	13.56	14.59	9.23	9.44	N/A
Russell 2000	12.39	10.76	15.21	11.56	9.77	8.89	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds and other investment companies.

Percentage of Fund Holdings As of 9/30/25 (%)

	Small-Cap Total Return
Glacier Bancorp	1.6
German American Bancorp	1.4
TowneBank	1.7

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Myth Busters: Small Caps vs. Private Equity

Nov 18, 2025 12:11:00 AM

The small-cap universe has long been misunderstood, but the myths surrounding it seem to have multiplied lately, alongside investor skepticism. We often hear, for example, that the number of small-cap companies is shrinking, that quality in the public markets has deteriorated compared to private equity, or that IPOs are skipping the small-cap space altogether.

Myth 1: The Number of Public Companies Is Shrinking

Since then, the number of small-cap public companies has remained remarkably stable, and in many respects has even expanded. There are actually more small-cap companies today than there were 15 years ago.

Myth 2: Public Small Caps Are Lower Quality Than Private Equity Holdings

	# of Names	# of Earners	% of Earners
Russell 1000
Russell 2000

Ultimately, we see this as a question of selectivity, not scarcity. The dispersion in small-cap fundamentals is exactly what enables active managers to identify the durable, cash-generating businesses that can compound over time.

Myth 3: The IPO Market Is Skipping Small-Caps

Percent of Total IPOs by Market Cap
From 1/1/2014 through 10/31/2025

Source: FactSet

The Bigger Picture

A Case for Perpetual Renewal

Important Disclosure Information

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.)

Waiting on the Small-Cap Quality Rebound

Nov 11, 2025 12:11:00 AM

Average Russell 2000 ROE Quintile Performance Over the Last 25 Years as of 9/30/25

Past performance is no guarantee of future results. Source: FactSet.

Here are 4 holdings that we think are positioned to thrive in a high-quality leadership phase:

Arcosa

Exponent

Onto Innovation

UFP Industries

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	4.80	0.75	13.08	10.14	10.32	10.87	12/31/91
Russell 2000	12.39	10.76	15.21	11.56	9.77	9.34	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 30 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees and other expenses.

Percentage of Fund Holdings As of 9/30/25 (%)

	Premier
Arcosa	3.4
Exponent	0.8
Onto Innovation	0.7
UFP Industries	1.0

Return on Invested Capital Return on Average Total Equity

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

PM Mark Fischer on 4 High-Confidence Positions and the Prospects for Quality Small-Caps Outside the U.S.

Nov 4, 2025 12:11:00 AM

Here are four companies that have the long-term confidence of our team who manage Royce International Premier Fund:

SmartCraft

Oslo-listed SmartCraft ASA

JTC

We first talked about U.K.-listed JTC

Headquartered in France,

Riken Keiki

Japanese company Riken Keiki

We view Riken Keiki as a classic example of a quietly dominant Japanese industrial champion leveraging its home-market strengths to build a global franchise. Despite its mission-critical role, growing recurring revenue streams, and expanding international growth prospects, the stock still trades at an attractive 9% forward cap rate. Analyst coverage also remains limited, with just two regional brokers following the name, leaving what we think is a durable, underappreciated compounder hiding in plain sight.

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
International Premier	-2.98	2.59	8.54	-0.30	5.87	5.20	12/31/10
MSCI ACWI x USA SC	6.68	15.93	19.36	9.97	8.37	6.17	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Gross operating expenses reflect the Fund's total gross annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Service Class's net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.44% through April 30, 2026.

Percentage of Fund Holdings As of 9/30/25 (%)

	International Premier
SmartCraft	1.2
JTC	2.8
Gaztransport Et Technigaz	2.3
Riken Keiki	2.1

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 ex USA Small Cap Index is an unmanaged, capitalization-weighted index of global small-cap stocks, excluding the United States. Index returns include net reinvested dividends and/or interest income. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

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. The Fund may invest a significant portion of its assets in foreign companies which may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic, or other developments that are unique to a particular country or region. These risk factors may affect the prices of foreign securities issued by companies headquartered in developing countries more than those headquartered in developed countries. (Please see "Investing in Foreign Securities" in the prospectus prospectus.)

Royce Small-Cap Special Equity Fund—3Q25 Update and Outlook

Oct 28, 2025 12:10:00 AM

How did Royce Small-Cap Special Equity Fund perform in 3Q25 and over longer-term periods?

Royce Small-Cap Special Equity Fund advanced 8.6% for the quarter, lagging its benchmark, Russell 2000 Value Index, which was up 12.6% for the same period. The Fund also trailed the Russell 2000 Value Index for the year-to-date period ended 9/30/25, up 2.0% versus 9.0%. The portfolio outperformed its benchmark for the 20-, 25-year, and since inception (5/1/98) periods ended 9/30/25 while lagging for the 1-, 5-, and 10-year periods.

How was performance at the sector level in 3Q25?

How did the Fund perform at the industry level in the third quarter?

Standard Motor Products, which manufactures and distributes premium replacement parts for the automotive aftermarket while also providing customizable solutions for vehicle control and thermal management categories in diverse end markets represented via its Engineered Solutions segment. Sylvamo Corporation, a low-cost producer of uncoated paper with a global reach, was the top detractor.

At the sector level, how did the Fund perform versus the Russell 2000 Value in 3Q25?

Turning to the year-to-date period ended 9/30/25, how were results at the sector level?

What were the top contributing and detracting industries in the year-to-date period?

Standard Motor Products and Sylvamo Corporation were the top contributor and detractor, respectively, for the year-to-date period as well.

At the sector level, how did the Fund perform versus the Russell 2000 Value for the year-to-date period?

What is your outlook?

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Special Equity	8.62	1.68	9.74	9.63	7.72	8.24	05/01/98
Russell 2000 Value	12.60	7.88	13.56	14.59	9.23	7.82	N/A
Russell 2000	12.39	10.76	15.21	11.56	9.77	7.49	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Shares redeemed within 30 days of purchase may be subject to a 1% redemption fee, payable to the Fund, which is not reflected in the performance shown above; if it were, performance would be lower. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees and other expenses.

Percentage of Fund Holdings As of 9/30/25 (%)

	Small-Cap Special Equity
Standard Motor Products	10.4
Sylvamo Corporation	3.6

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. The Fund invests primarily in small-cap stocks which may involve considerably more risk than investing in larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.) As of 9/30/25, the Fund invested a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.)

What’s Working in Small-Cap Growth Investing?

Oct 21, 2025 12:10:00 AM

How did Royce Smaller-Companies Growth Fund perform in 3Q25?

Chip Skinner: The quarter was somewhat disappointing: the Fund advanced 4.7%, lagging its benchmark, Russell 2000 Growth Index, which was up 12.2% for the same period.

How has the Fund done over longer-term periods?

CS:

How did the Fund do on a sector basis in 3Q25?

CS:

What about at the industry level?

CS:

How did the Fund do at the sector level for the year-to-date period ended 9/30/25?

CS:

How were year-to-date results on an industry basis?

CS:

How did the Fund perform at the sector level versus the Russell 2000 Growth for the year-to-date period?

CS:

How do you see the current small-cap landscape?

CS:

Average Expected Earnings Growth for 2025-2026
Index Aggregate Estimated Two-Year EPS Growth

How have you been positioning the portfolio?

CS:

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Smaller-Companies Growth	4.66	18.94	18.38	9.24	9.70	10.61	06/14/01
Russell 2000 Growth	12.19	13.56	16.68	8.41	9.91	7.78	N/A
Russell 2000	12.39	10.76	15.21	11.56	9.77	8.22	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Gross operating expenses reflect the Fund's total gross annual operating expenses for the Investment Class and include management fees and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Investment Class's net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.02% through April 30, 2026.

All performance and risk information presented in this material prior to the commencement date of Investment Class shares on 3/15/07 reflects Service Class results. Shares of the Fund's Service Class bear an annual distribution expense that is not borne by the Investment Class.

Percentage of Fund Holdings As of 9/30/25 (%)

	Smaller-Companies Growth
Corcept Therapeutics	1.3
	0.0

Quarterly Small-Cap Equity Factor Review—3Q25

Oct 16, 2025 12:10:00 AM

Micro-cap Stocks Shined in Q3

In the third quarter of 2025, micro-cap stocks, represented by the size factor, demonstrated notable strength within the Russell 2000 universe, advancing 25.0%. In contrast, both low volatility and dividend-paying stocks underperformed, returning 6.6% and 7.2% respectively. The broader Russell 2000 Index rebounded solidly, gaining 12.4% for the quarter.

Small-Cap Factor Performance in 3Q25 and Year-to-Date 2025
Average Annual Total Returns for 3Q25 and Year-to-Date Periods for the Deep Value, Quality Value, and Dividend Value Factors Within the Russell 2000 Index

Past performance is no guarantee of future results. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Royce Small-Cap Deep Value Performed the Best Among the Royce Multi-Factor Indexes

Royce Multi-Factor Index Performance
Average Annual Total Returns for 3Q25, Year-to-Date and Since the Russell 2000 Trough on 4/8/2025

Past performance is no guarantee of future results. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

In Q3 2025, the Russell 2000 Index surpassed its prior peak from November 25, 2024. From the trough on April 8, 2025, the Royce Small-Cap Deep Value Index performed the best, rising 42.4%, while the broader Russell 2000 Index returned 39.3%.

Outlook

Small-cap stocks delivered a strong performance in Q3 2025, led by more speculative names. The Deep Value strategy turned in an impressive showing and stands to benefit further should the Federal Reserve adopt a more aggressive rate-cutting stance.

Additionally, the year-over-year growth rate of the true money supply remained slightly positive in Q3, an early signal of monetary easing. However, given the current pace of monetary expansion, the environment continues to favor the Small-Cap Dividend Value strategy in the near term.

Important Disclosure Information

The thoughts concerning recent market movements and future prospects for small-company stocks are solely those of Royce Investment Partners, and, of course, there can be no assurances with respect to future small-cap market performance. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

¹High Growth Small-Caps High Momentum Small-Caps Small Size Small-Caps High Value Book-to-Price Small-Caps

²High Value Earnings Yield Small-Caps , i.e. its earning yield (share price divided by trailing 12-month earnings per share). High Profitability Small-Caps

³Dividend Payer Small-Caps are securities within the Russell 2000 that paid a dividend within the last 12-months. Low Volatility Small-Caps Low Leverage Small-Caps

All factors are equal weighted, rebalanced quarterly, and performance is calculated monthly.

The Royce Small-Cap Quality Value Index is a proprietary index composed of small-cap stocks trading in the United States with relatively low valuations, high profitability and high debt coverage compared with the average of stocks in the investment universe. The Royce Small-Cap Deep Value Index is a proprietary index composed of small-cap stocks trading in the United States with relatively low valuations and high debt coverage compared with the average of stocks in the investment universe. The Royce Small-Cap Dividend Value Index is a proprietary index composed of small-cap dividend paying stocks trading in the United States with relatively low valuations, high profitability and high debt coverage compared with the average of stocks in the investment universe. Royce has retained Solactive AG, an unaffiliated third party, to calculate the Underlying Indexes. Solactive AG publishes information regarding the market value of the Underlying Indexes. The full Index rulebooks are available upon request. Past performance is no guarantee of future results. The performance of an index does not represent exactly any particular investment, as you cannot invest directly in an index.

Small-Cap Opportunistic Value Strategy—3Q25 Update and Outlook

Oct 14, 2025 12:10:00 AM

How did the Small-Cap Opportunistic Value Strategy perform in 3Q25 and off the market low on 4/8/25?

Jim Harvey: We were very pleased with the way that Royce Small-Cap Opportunity Fund, the portfolio we manage in the Strategy, performed in both periods. The Fund increased 12.9% in the quarter, beating its primary small-cap benchmark, Russell 2000 Value Index, which was up 12.6%, and the small-cap Russell 2000 Index, which gained 12.4%, for the same period. From April 8th through the end of September, the Fund rose 47.3%, ahead of both the Russell 2000 Value, which was up 35.3%, and the Russell 2000, which was up 39.3%, for the same period.

How has the Fund done versus its benchmark over longer-term periods?

Brendan Hartman:

Kavitha Venkatraman

What happened at the industry level during the quarter?

Jim Stoeffel:

How did the Fund perform relative to the Russell 2000 Value on a sector basis in 3Q25?

BH:

How did the Fund perform at the sector level for the year-to-date period ended 9/30/25?

KV:

What were the biggest industry contributors and detractors for that period?

JH:

How did performance stack up at the sector level versus the Russell 2000 Value for the year-to-date period ended 9/30/25?

JS:

What is your outlook for the Strategy?

BH:

Important Disclosure Information

Average Annual Total Returns as of 9/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	12.93	13.95	17.67	16.93	12.63	11.89	11/19/96
Russell 2000 Value	12.60	7.88	13.56	14.59	9.23	8.99	N/A
Russell 2000	12.39	10.76	15.21	11.56	9.77	8.42	N/A

¹ Not annualized.

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

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

The Case for Allocating to International Small-Cap Stocks

Oct 1, 2025 12:10:00 AM

Putting International Small-Caps On the Map

This paper provides an introduction for asset allocators to the international small-cap asset class by detailing its attributes in terms of performance, volatility, correlation, and fundamentals.

Because asset allocators often compare international small-cap with international large-cap, we thought it was particularly important to examine the long-term relative performance of these two asset classes to highlight the regular frequency with which international small-caps outperformed their large-cap siblings.

We then go on to examine how the two asset classes fared in different market environments, such as rising and falling equity markets and rising and falling interest rates periods, which showed that certain periods resulted in even wider positive relative return spreads for international small-caps.

Finally, we look at some indicators that suggest, at least to us, why the current period offers a compelling and timely opportunity. We conclude by highlighting some fundamental factors that we believe make the asset class potentially fertile ground for active management.

Introducing a Large Opportunity in International Small-Caps

Considering that less than 1% ¹ of mutual fund assets in the U.S. are invested in small-caps outside the U.S., we suspect that many asset allocators think of international small-caps (if they think of them at all) as a nearly indistinguishable subset of the large non-U.S. equity universe. If this is correct, international small-caps would seem to be facing an uphill climb toward recognition as an accepted asset class, much like their stateside cousins did more than two decades ago. However, the facts tell a story that should level that hill. Many asset allocators will be surprised to learn that the total market value of the companies in the MSCI ACWI ex USA Small Cap Index, our proxy for international small-caps, is twice as large as that market capitalization of the Russell 2000 Index.

¹ Source: Morningstar

Compared with U.S. small-caps, there are:

Strong Long-Term Relative and Absolute Performance

By market value alone, international small-caps would seem to merit consideration for inclusion in a globally diversified portfolio. However, their performance record makes an even stronger case for its inclusion as part of an overall equity allocation. (All of the results that follow begin with the first full month of performance for the MSCI ACWI ex USA Index on 5/31/94).

Averages of Monthly Rolling Annualized 10-Year Returns

Past Performance is no guarantee of future results.

Annualized rolling monthly 10-year returns for the international small-cap index exceeded the MSCI ACWI ex USA Large-Cap Index (our proxy for international large-cap stocks), and came close to its domestic counterpart in the Russell 2000. For additional context, we also looked at results for the large-cap Russell 1000 over these same periods.

Beyond this strong relative long-term performance record, international small-caps have additional attractive attributes that might be relevant for asset allocators.

Lower Volatility and Attractive Risk-Adjusted Returns

Like their domestic peers, international small-caps have a reputation for high volatility. Even in the context of solid performance, more cautious asset allocators might not consider an investment for fear of taking on an unacceptable level of risk for their clients. The data, however, suggests a different conclusion.

In fact, international small-caps have lower volatility than U.S. small-caps and only marginally higher volatility than international large-caps, based on rolling 10-year standard deviation.

Attractive Risk/Return Trade-Off
Average of Monthly Rolling 10-Year Periods from 5/31/94 through 6/30/25

Past Performance is no guarantee of future results.

Additionally, over this same rolling 10-year period, international small-caps had comparable risk-adjusted returns to U.S. large-caps and small-caps, as well as higher returns than international large-caps, as measured by Sharpe ratio.

Monthly Rolling Annualized 10-Year Sharpe Ratios
From Indexes First Full Month (Ended 5/31/94) through 6/30/25

Past performance is no guarantee of future results

¹ There can be no assurance that companies that currently pay a dividend will continue to do so in the future.

Historical Portfolio Benefits of Low Correlation

As one might expect, international small-caps have a lower correlation to U.S. larger-caps than either international large-caps or U.S. small-caps.

Correlation to U.S. Large-Cap
As of 6/30/25

Correlation of monthly returns from 5/31/94 through 6/30/25

To test the performance and volatility effects this lower correlation might have, we ran results for two hypothetical multi-asset portfolios. For each, we charted hypothetical returns (measured by the growth of $10,000), standard deviation, and Sharpe ratio. Both portfolios were rebalanced quarterly and encompassed the same time period, 5/31/94-6/30/25.

Quarterly Rebalanced, From 5/31/94 through 6/30/25

Past performance is no guarantee of future results.

Persistence in Beating Large-Caps

Batting Average of International Small-Cap vs International-Large Cap
MSCI ACWI x USA SC vs MSCI ACWI x USA LC Monthly Rolling Average Annual Return Periods from the Index Inception (5/31/94) through 6/30/25

Past Performance is no guarantee of future results.

International Small-Cap Results in Different Environments

Analyzing monthly trailing one-year returns from 5/31/94-6/30/25, which consists of 362 periods, we found that while international small-caps outperformed large-caps over most rolling time periods, there were market conditions in which the performance spread was greater than others.

We first examined both positive and negative return periods for the international all-cap index to see how non-U.S. small-caps performed versus their large-cap peers. The result was a relative advantage for the international small-cap index in both negative and positive return periods for non-U.S. stocks. We then broadened our scope, examining returns for the international small- and large-cap indexes when the 10-year German Bund yield was rising and falling:

International Small-Cap vs International Large-Cap in Different Market Environments MSCI ACWI ex USA SC vs MSCI ACWI ex USA LC Monthly Rolling Trailing 1-year Periods from 5/31/94 through 12/31/22
MARKET ENVIRONMENTS		PERIODS INT'L SMALL-CAP BEAT INT'L LARGE-CAP	BATTING AVG	INT'L SMALL-CAP	INT'L LARGE-CAP	AVG SPREAD
International Equity	Positive	148/241	61%	19.1%	17.0%	2.0%
International Equity	Negative	56/121	46%	-13.5%	-13.4%	-0.1%
10-Year German Bund	Rising	86/137	63%	18.1%	15.3%	2.8%
10-Year German Bund	Falling	118/225	52%	1.8%	1.7%	0.4%

International small-caps outperformed their large-cap counterparts in both rising and falling rate environments, but the absolute return level and relative return spread were each significantly different. The best results for U.S. dollar investors came when German Bund Yields were rising, which is possibly due to three overlapping factors: bond yields usually rise when economies are improving, international small-caps have more cyclical exposure than international large-caps, and rising Bund Yields often occur in periods of U.S. dollar weakness, resulting in enhanced gains for U.S. dollar investors.

In three of the four scenarios shown above, the advantage went to international small-cap. We think the results of our research therefore present a strong argument for making a strategic allocation to this asset class.

Among the other compelling reasons to consider allocating to international small-caps is the timeliness of the opportunity. Over the long-term, international small-caps and U.S. small- caps have experienced rotating periods of outperformance with minimal long-term difference between the indexes. However more recently, international small-caps have underperformed which we think has increased the probability for future international outperformance.

International Small-Caps Poised for a Rebound?
MSCI ACWI ex USA Small Cap vs Russell 2000 Annualized Trailing 10-Year Relative Return Spread from 5/31/94 through 6/30/25

¹The 10-year average annual total return through 6/30/25 was 6.54% for the MSCI ACWI ex USA Small Cap and 7.12% for the Russell 2000, -5.26% represents the difference.

When International Has Outperformed U.S.
Monthly Rolling Trailing 1-year Periods from the Index Inception (5/31/94) through 6/30/25

The historical data suggests, then, that relatively good periods for international stocks mean relatively better periods for international small-caps. So while there is no guarantee of the course of future returns, we think the long-term performance history of the two small-cap indexes suggests that a multi-year run for international small-caps is possible. In our view, this is especially relevant when evaluating the opportunity in non-U.S. small-caps.

The Case for Active Management in International Small-Caps

Do the attractive attributes of international small-caps also offer the potential for active managers to improve on these results? We believe they do, based on the following:

A Large and Diverse Asset Class

There are more than twice as many international small-caps as domestic small-caps, providing ample opportunity for active managers to search for mispriced stocks. Further, international small-caps offer access to local, regional, and global businesses hailing from a diverse group of 47 countries.

An Inefficient Asset Class

About 25% of the companies in the MSCI ACWI ex USA Small Cap were receiving one or no sell-side analyst coverage versus 15% for those in the Russell 2000 as of 6/30/25. ¹ This provides an active manager with a potentially sizable analytic advantage.

High ROIC Companies

²-6/30/25, compared to 9.8% for the overall index over the same period. This suggests to us that an active management approach focusing on companies with higher profitability and sustainability can enhance the potential for higher returns. ³

Companies with Earnings

Loss-making international small-cap companies have historically lagged. In fact, companies with positive earnings have outperformed the international small-cap index, gaining 11.5% versus 9.8% on an average annual total return basis from 1/31/03-6/30/25. A manager who focuses on non-U.S. small-caps with established histories of earnings may therefore also be able to potentially enhance returns.

¹Source: Factset
²
³

Historical Performance of Active International Small-Cap Funds

This research also shows that the universe of non-U.S. small-cap stocks is a fruitful starting point, giving active managers a number of opportunities to potentially prune the list of investment candidates.

U.S. Fund Foreign Small/Mid Blend Outperformed the MSCI ACWI ex USA Small Cap Index ¹
Monthly Rolling Average Annual Return 5-Year Periods From 5/31/94 through 6/30/25

Conclusion

We think that the combination of strong absolute and relative performance, low correlation to both international large-caps and U.S. small-caps, and strong results in a number of different market environments makes a very strong case for including international small-caps in a globally diversified portfolio. In our view, the timeliness of the opportunity serves to bolster an already compelling case. We suggest that asset allocators consider the potential advantages active management can offer within the asset class based on both the historical strength of certain fundamentals and the overall inefficiency of this large and diverse group of small-cap stocks.

DOWNLOAD THE WHITEPAPER

Appendix: International Small-Caps vs Emerging Markets

While we believe that our research makes a clear and compelling case for an international small-cap allocation, we understand that some investors will also want to know how the asset class has fared relative to emerging market stocks. This may be of particular relevance given that emerging markets equities have a similar reputation to small-cap stocks for both high returns and high risk.

International Small-Cap: Comparable Return and Lower Risk than Emerging Markets

Sharpe Ratio
Average of Monthly Rolling 5-Year Periods from 5/31/94 through 6/30/25

Down Market Performance Comparison
From 5/31/94 through 6/30/25

Important Disclosure Information

Standard Deviation is a measure that quantifies the amount of variation or dispersion in a data set. Roughly 68% of the data values are within one standard deviation of the mean.

Any information, statements and opinions set forth herein are general in nature, are not directed to or based on the financial situation or needs of any particular investor, and do not constitute, and should not be construed as, investment advice, a forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Five Theme-Based Holdings in Our Small-Cap Opportunistic Value Strategy

Sep 23, 2025 12:09:00 AM

(Nasdaq: FLOC)
12/31/24-9/19/25

Past performance is no guarantee of future.

IAC

(Nasdaq: IAC)
12/31/24-9/19/25

Past performance is no guarantee of future.

Spun out of NCR in 2023, NCR Atleos

(NYSE: NATL)
12/31/24-9/19/25

Past performance is no guarantee of future.

Perella Weinberg Partners Cl. A

With a debt-free balance sheet, significant cash, embedded growth from senior hires, and its recent diversification into private funds advisory, we think PWP is well positioned for earnings acceleration and a potential re-rating closer to its industry peers.

(Nasdaq: PWP)
12/31/24-9/19/25

Past performance is no guarantee of future.

Spun out of Honeywell in 2018, Resideo Technologies (NYSE: REZI) is a leading provider of home comfort, control, and monitoring systems such as thermostats, leak detectors, and fire safety systems, as well as to residential security devices like cameras and sensors. It also owns a leading wholesale distribution network called ADI. We are long-term shareholders and are seeing the company approaching the end of a turnaround phase.

(NYSE: REZI)
12/31/24-9/19/25

Past performance is no guarantee of future.

Important Disclosure Information

Average Annual Total Returns as of 8/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	9.75	9.85	11.55	15.74	11.62	11.81	11/19/96
Russell 2000 Value	10.39	5.83	8.84	13.06	8.62	8.94	N/A
Russell 2000	9.00	8.17	10.28	10.13	8.88	8.33	N/A

¹ Not annualized.

Average Annual Total Returns as of 6/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	11.70	3.67	10.97	16.55	9.41	11.52	11/19/96
Russell 2000 Value	4.97	5.54	7.45	12.47	6.72	8.62	N/A
Russell 2000	8.50	7.68	10.00	10.04	7.12	8.06	N/A

¹ Not annualized.

The thoughts and opinions of Ms. Venkatraman, Mr. Hartman, Mr. Harvey, and Mr. Stoeffel concerning the stock market are solely their own and, of course, there can be no assurance with regard to future market movements. No assurance can be given that the past performance trends as outlined above will continue in the future.

Percentage of Fund Holdings As of 6/30/25 (%)

	Small-Cap Opportunity
Flowco Holdings Cl. A	0.2
IAC	0.8
NCR Atleos	1.0
Perella Weinberg Partners Cl. A	0.9
Resideo Technologies	1.1

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

Four Small-Caps with Premier Qualities

Sep 16, 2025 12:09:00 AM

With the robust small-cap rally having picked up steam through the summer months, we asked the portfolio management team for Royce Premier Fund

Dorman Products

(NASDAQ: DORM)
12/31/24-9/12/25

Past performance is no guarantee of future results.

ESAB Corporation

(NYSE: ESAB)
12/31/24-9/12/25

Past performance is no guarantee of future results.

Quaker Houghton

(NYSE: KWR)
12/31/24-9/12/25

Past performance is no guarantee of future results.

TMX Group

(X.CN / OTC: TMXXF:US)
12/31/24-9/12/25

Past performance is no guarantee of future results.

Important Disclosure Information

Average Annual Total Returns as of 8/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	6.65	3.37	10.11	9.55	9.83	10.95	12/31/91
Russell 2000	9.00	8.17	10.28	10.13	8.88	9.27	N/A

¹ Not annualized.

Average Annual Total Returns as of 6/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	6.70	1.34	9.49	9.67	8.36	10.80	12/31/91
Russell 2000	8.50	7.68	10.00	10.04	7.12	9.04	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 6/30/25 (%)

	Premier
Dorman Products	2.1
ESAB Corporation	2.6
Quaker Houghton	2.4
TMX Group	3.1

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Global Small-Caps: A World of Overlooked Opportunities

Sep 16, 2025 12:09:00 AM

Why Allocate to Global Small-Cap Stocks?

Those allocators already familiar with global large caps may be pleasantly surprised by the similarity in the risk profiles of global large and small caps. Given this comparable risk profile, we think allocators may also be surprised by the regular frequency with which global small-caps have historically delivered higher returns than their larger peers.

The first section compares rolling returns and the frequency of outperformance, risk metrics, and risk-adjusted returns, along with down market and recovery periods, for global small-cap and global large-cap before looking at global small-caps versus emerging markets on the same parameters. ¹ We also present regime studies that reveal the environments that are more and less favorable for each of the three asset classes, comparing them during periods of rising and falling interest rates, increasing and decreasing cyclical activity, narrowing and widening credit spreads, and higher and lower levels of nominal GDP growth. We then show the potential performance benefits of adding global small-caps to a portfolio of global large-caps and to a portfolio of both global large-caps and emerging markets.

The asset class has historically enjoyed:

1) A superior return profile to global large-caps despite a comparable risk profile;
2) A meaningfully lower risk profile than emerging market stocks, despite a somewhat better long-term return profile;
3) A performance record that suggests portfolios could improve their returns without increasing their risk by including global small caps; and
4) Attributes which indicate the asset class may be a fruitful area for active management.

¹ Throughout this paper, we used the MSCI ACWI Small Cap Index as our proxy for global small-caps, the MSCI ACWI Large Cap Index as our proxy for global large-cap stocks, and the MSCI Emerging Markets Index as our proxy for emerging markets for the data in this paper.
Past performance is no guarantee of future results.

An Undiscovered Country

Strong Long-Term Performance and Consistent Outperformance Versus Global Large Caps

% of Outperformance Periods for MSCI ACWI Small-Cap vs MSCI ACWI Large-Cap
Monthly Rolling Average Annual Return Periods from Index Inception (5/31/94) through 6/30/25

Past performance is no guarantee of future results. The above chart is shown for illustrative purposes only and does not reflect the past performance, or project the future performance, of any investment. The performance of an index, such as those used above, does not represent any particular investment as you can not invest in an index. Source: Bloomberg.

Lower-Than-Expected Volatility and Higher Risk Adjusted Returns Versus Global Large-Caps

Responsible allocators must always bear risk in mind, and the attractive long-term performance record for global small-caps would mean less if this advantage came with a markedly higher risk profile. Fortunately, . Global small-caps have higher volatility based on average five- and 10-year rolling monthly average standard deviation, but only modestly so. Moreover, the relatively low incremental volatility of global small- caps is complemented by the relatively large return spread versus global large- caps, a combination that has produced a superior risk/return trade-off as illustrated by the scatterplot.

Average of Monthly Rolling 5- and 10-Year Periods

The above chart is shown for illustrative purposes only and does not reflect the past performance, or project the future performance, of any investment. The performance of an index, such as those used above, does not represent any particular investment as you can not invest in an index. Past performance is no guarantee of future results. Source: Bloomberg.

As might be expected given this favorable risk/return profile, global small-caps have consistently delivered appreciably better risk-adjusted returns than global large-caps, as measured by Sharpe ratio, as well as an admirably high percentage of outperformance periods.

Relative Risk Adjusted Returns for Global Small Cap vs. Global Large Cap
Monthly Rolling Sharpe Ratios from 5/31/94-6/30/25

	PERIODS GLOBAL SMALL BEAT GLOBAL LARGE		MSCI ACWI SMALL AVG*	MSCI ACWI LARGE AVG*
Five-Year	193/314 PERIODS	61%	0.46%	0.42%
10-Year	184/254 PERIODS	72%	0.45%	0.36%

*Average of monthly rolling sharpe ratios over the specified periods.
Past performance is no guarantee of future results. Source: Bloomberg.

Alternative Risk Metrics

While volatility is the most common way of measuring risk, we use two additional measures that are helpful in understanding the potential risks of investing in global small-caps. First, one intuitive definition of risk is the probability of a capital loss. While that probability cannot be known with certainty about a future investment, we suspect that most allocators would be surprised by the percentage of multi-year holding periods when global small-caps experienced a loss, compared with the loss experienced by global large-caps.

Global small-caps had fewer periods of negative or flat returns than global large-caps over rolling 5-year periods. Notably, global small-caps had no negative return experiences over 10-year holding periods, while global large-caps had 17, or 7% of the time.

% of Positive Monthly Rolling Return Periods

Number of periods where MSCI ACWI SC has a positive return: 5-Year, 295 / 314, 10-Year, 254 / 254.
Number of periods where MSCI ACWI LC has a positive return: 5-Year, 255 / 314, 10-Year, 237 / 254.
Past performance is no guarantee of future results. Source: Bloomberg.

Down Market Performance Comparison of Global Small Cap vs. Global Large Cap
From 5/31/ 5/31/94 through 6/30/25(%)

Past performance is no guarantee of future results. Source: Bloomberg.

However, global small-caps also experienced stronger recoveries than global large-caps, averaging 56.9% one year after market troughs, compared with 44.4% for large-cap counterparts. Putting the decline and first year of recovery together shows that global small-caps declined further and bounced back stronger to lead over six of the eight periods.

Subsequent 1-Year Periods after Down Market Performance Comparison
From 5/31/94 through 6/30/25

Past performance is no guarantee of future results. Source: Bloomberg.

A Surprising Performance Advantage Over Emerging Market Equities

The performance spread for global small-caps was narrower versus emerging market equities than it was versus global large-caps, though we have found that any performance advantage for global small-caps tends to come as a surprise, particularly to emerging market equity investors.

% of Outperformance Periods for MSCI ACWI Small Index vs MSCI EM Index
Monthly Rolling Average Annual Return Periods from Index Inception (5/31/94) through 6/30/25

Significantly Lower Volatility and Attractive Risk-Adjusted Returns Versus Emerging Markets

The second misperception relates to the degree of difference in the volatility between the two asset classes. Emerging market equity investors often contend that the two asset classes must have comparable risk profiles. Yet, their return histories show that emerging market equity has a meaningfully higher volatility profile than global small caps. We think that the higher returns and lower volatility of global small caps versus emerging market equities create an attractive risk/ reward profile for the former, as shown in the scatterplot.

Average of Monthly Rolling 5- and 10-Year Periods

In light of both its strong relative performance history and lower volatility, it comes as no surprise that global small caps have a record of consistently higher risk-adjusted returns than emerging markets.

Relative Risk Adjusted Returns for Global Small Caps vs. Emerging Markets
Monthly Rolling Sharpe Ratios from 5/31/94-6/30/25

	PERIODS GLOBAL SMALL BEAT EMERGING MARKETS		MSCI ACWI SMALL AVG*	MSCI EM AVG*
Five-Year	218/314 PERIODS	69%	0.46	0.29
10-Year	179/254 PERIODS	70%	0.46	0.32

*Average of monthly rolling sharpe ratios over the specified periods.
Past performance is no guarantee of future results. Source: Bloomberg.

Frequency of Loss and Down Market Comparisons Versus Emerging Markets

Extending our risk analysis of the two asset classes to include additional risk measures confirms our earlier observations. Global small-caps had fewer periods when they experienced a loss than emerging market equities over rolling 5- and 10-year periods while posting higher average returns. The disparities are startling. Over five-year rolling monthly return periods, the MSCI ACWI Small Cap had 19 negative return periods--while the MSCI EM Index had 74. The global small-cap index had no negative monthly 10-year rolling return periods; emerging markets had seven.

Global small-caps also experienced less severe declines than emerging market equities, beating them in five of the seven major downturns of 20% or more since the inception of the global small- cap index on 5/31/94.

Down Market Performance Comparison
From 5/31/94 through 6/30/25

Past performance is no guarantee of future results. Source: Bloomberg.

Recovery periods were equally favorable for global small-caps, which had an average return in the subsequent recoveries, averaging 56.9% (as mentioned below) one year after the market trough, compared to 52.7% for emerging markets. Putting the decline and first year of recovery together shows a decided performance advantage for global small-cap stocks.

Subsequent 1-Year Periods after Down Market Performance Comparison
From 5/31/94 through 6/30/25

Past performance is no guarantee of future results. Source: Bloomberg.

Global Small-Cap Results in Different Environments

To further examine the superior performance record for global small-caps versus global large-caps and emerging market equities, we analyzed different economic regimes based on four indicators to see which led to the most favorable and unfavorable returns for each of the three asset classes. The four regime conditions were: interest rates, using the 10-year U.S. Treasury yield; cyclical activity, using the U.S. ISM Manufacturing Index; credit spreads, using U.S. high yield spreads; and the level of economic activity, using nominal U.S. GDP growth. For two of the four indicators, we calculated rolling one-year returns from 5/31/94 and compared the results. (We note that data for high-yield spreads only goes back to 12/31/96.)

Looking at interest rates, we found a positive correlation for all three asset classes with rising interest rates, perhaps a surprising result for some. All three asset classes had average one-year returns in rising rate periods that exceeded their overall average one-year returns. Global small-caps outperformed global large-caps in 58% of the observations by an average of 309 basis points. Global small-caps also beat emerging market stocks in 55% of the periods, with an average spread of 97 basis points. When the 10-year Treasury yield was falling, global large-caps fared best, with an average gain of 3.2% while small-caps averaged 2.0%, and emerging markets declined -0.6% on average. It seems likely that the three asset classes did not advance solely because interest rates were rising but because other positive factors, such as economic acceleration, were coincident.

Interest Rate Environments
Monthly Rolling Trailing 1-year Periods from 5/31/94 through 6/30/25

Past performance is no guarantee of future results. Global SC is the MSCI ACWI SC Index, Global Large Cap is the MSCI ACWI LC Index, and EM is the MSCI EM Index. Source: Bloomberg

all three asset classes had average returns that exceeded their overall average one-year returns for periods with rising U.S. ISM readings.

Global small-caps outperformed global large-caps in 62% of the observations by an average of 330 basis points, while global small-caps underperformed emerging market equities by 122 basis points and had lower returns in 56% of the periods. During periods of falling ISM measures, global large caps beat both global small-caps and emerging markets the majority of the time, with an average gain of 3.5% versus an average gain of 1.8% for global small-caps and a loss of -2.9% for emerging markets.

ISM Environments
Monthly Rolling Trailing 1-year Periods from 5/31/94 through 6/30/21

Past performance is no guarantee of future results. Global SC is the MSCI ACWI SC Index, Global Large Cap is the MSCI ACWI LC Index, and EM is the MSCI EM Index. Source: Bloomberg.

Credit Spread Environments
Monthly Rolling Trailing 1-year Periods from 5/31/94-6/30/25
Past performance is no guarantee of future results. Global SC is the MSCI ACWI SC Index, Global Large Cap is the MSCI ACWI LC Index, and EM is the MSCI EM Index. Source: Bloomberg.
During periods when credit spreads were narrowing, global small-caps outperformed global large-caps

Our last test looked at performance in the context of nominal U.S. GDP growth. Previous research showed better correlations of small-cap returns with nominal, rather than real, U.S. GDP growth, as small-caps tend to benefit from both increased inflation and increased real economic growth. We looked at periods of 3-5% nominal U.S. GDP growth compared with periods that grew by more than 5%. The return gap was notable in that global small-caps beat global large- caps 51% of the time by an average of 70 basis points when nominal GDP growth was in the 3-5% range. However, g lobal small-caps underperformed their large-cap siblings by an average of 80 basis points in 68% of the periods when nominal GDP growth was 5% or greater. Somewhat counterintuitively, global small-caps beat emerging markets stocks during these more robust, 5%-plus periods, beating them 74% of the time, with an average return of 10.6% versus 7.3% for emerging markets.

Nominal U.S. GDP Environments
Quarterly Rolling Trailing 1-year Periods from 6/30/05-6/30/25

5%" class="" height="251" src="insights/whitepapers/images/global-small-caps-a-world-of-overlooked-opportunities/glo-sc-whitepaper_nom-gdp-enivronments.svg" width="524">

Past performance is no guarantee of future results. Global SC is the MSCI ACWI SC Index, Global Large Cap is the MSCI ACWI LC Index, and EM is the MSCI EM Index. Source: Bloomberg

There seem to be clear patterns of relative performance advantages among the three asset classes through different environments. A simplified way to show the same diverse tendencies is to look at returns in each of the past 25 calendar years for the three asset classes, sorted by best return.

The graphic below shows the number of years in which each index finished first or last:

Past performance is no guarantee of future results. Global SC is the MSCI ACWI SC Index, Global Large Cap is the MSCI ACWI LC Index, and EM is the MSCI EM Index. Source: Bloomberg.

These varying results suggest that it might be productive to include these asset classes together in a portfolio, but we think the more salient point is that global small-cap enjoyed fewer years with the lowest return of the three asset classes

Portfolio Examples

While both portfolios showed strong standard and risk-adjusted performance, the portfolio with the global small-cap allocation had higher absolute and risk-adjusted returns as well as comparable volatility.

Four Hypothetical Growth of $100,000,000 by Portfolio Allocations
Quarterly Rebalanced from 5/31/94-6/30/25 (Monthly Data)

The Case for Active Management in Global Small-Caps

Do the attractive attributes of global small caps also offer the potential for active managers to improve on these results? We believe they do, based on the following observations.

A Large and Inefficient Asset Class

A Large Opportunity Set
Number of global small cap vs. large cap companies as of 6/30/25
Source: FactSet
Past performance is no guarantee of future results.
An Inefficient Asset Class

Source: FactSet
Past performance is no guarantee of future results.
High ROIC Companies

Additional support for the case for active management derives from showing that some filters active managers can use have produced historically superior results. For example, the subset of companies within global small-caps with high profitability, based on ROIC (return on invested capital), have delivered returns that markedly exceeded those for the index as a whole. The average annual total return for the top ROIC decile of global small-cap stocks was 14.8% from 3/31/03-6/30/25, compared to 10.5% for the overall index over the same period. This suggests to us that an active management approach focusing on companies with higher profitability can enhance the potential for higher returns.

Conclusion

We suggest that global allocators also consider the potential advantages active management can offer within this asset class based on both the historical strength of certain filters and the overall inefficiency of this large opportunity set of global small-cap stocks.

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Important Disclosure Information

A Micro-Cap Moment?

Sep 9, 2025 12:09:00 AM

The Micro-Cap Universe

One might have expected that both the continued popularity of ETFs and the emergence of alternative investment options for retail investors might lead to more micro-cap-centered offerings, yet they are still largely unexplored as an investment option in and of themselves, (though many small-cap funds, including most of our own, and ETFs have some exposure to micro-cap stocks). Because we have been managing portfolios that focus on the asset class for more than three decades, we find this lack of investment attention somewhat puzzling.

Of course, micro-cap stocks carry significant risks.

However, we think that the micro-cap universe offers numerous opportunities to find companies that are lightly researched and/or appear to be mispriced. Many of the risks involved in micro-cap investing often create promising opportunities for disciplined active management.

Micro-caps have been among the best performing asset classes off the April 8th lows, with the Russell Microcap Index up 47.6% from 4/8/25-9/5/25. Yet micro-caps with earnings were attractively priced at the end of June as measured by the price-to-earnings ratio for the Russell Microcap.

Micro-Cap P/Es Were Below Average
Weighted Harmonic Average Price-to Earnings Ratio (Excluding Non-Earners) for the Russell Microcap, 6/30/00-6/30/25

Source: FactSet
Harmonic Average

Relative Valuations for Micro-Caps vs. Large-Caps Were Well Below Their 25-Year Average
Russell Microcap vs. Russell 1000 Median LTM EV/EBIT (ex. Negative EBIT Companies), 6/30/00-6/30/25

Source: FactSet

We typically further examine this metric by looking across the 11 sectors in the micro- and large-cap indexes. As of 6/30/25, eight sectors in the Russell Microcap were undervalued versus the Russell 1000, with the broad and diverse Financials, Health Care, and Industrials sectors especially undervalued relative to the large-cap index.

Breadth of Undervaluation Across 8 of 11 Sectors in the Russell Microcap
Russell Microcap and Russell 1000 Median EV/EBIT (ex. Negative EBIT) by Sector as of 6/30/25

Source: FactSet

We manage three portfolios that focus on micro-cap stocks: The open-end Royce Micro-Cap Fund (which is one of the oldest open-end funds dedicated to investing in micro-cap stocks), our closed-end offering, Royce Micro-Cap Trust (one of the only closed-end funds dedicated to investing in micro-cap stocks), and , a variable annuity product that is one of the only variable annuity products dedicated to investing in micro-caps.

Portfolio Manager Jim Stoeffel and Assistant Portfolio Manager Andrew Palen manage all three portfolios. In each fund, they deploy a core approach, which enables them to identify opportunities in an area of the market that still has minimal research coverage.

Jim and Andrew use multiple approaches in these portfolios, which gives them ample exposure to the entire asset class while the discipline of a long-term investment horizon keeps them focused on the fundamental business strengths that can potentially generate strong long-term performance. They generally focus on micro-cap companies with strong balance sheets, attractive growth prospects, and/or the potential for improved cash flows and internal rates of return and slot portfolio holdings into four categories:

Depressed Earnings

The company has a very low valuation based on Price/Book and/or Price/Sales ratios.
The company has specific catalysts for change.

Out-of-Favor Value

The company has above average profitability.
The company has lower than average leverage.
The company has a low valuation and low expectations.

Premier

The company has a discernible competitive advantage.
The company has high returns on capital.

Growth at a Reasonable Price

The company has superior projected growth.
The company has support from secular themes.
The company also has a modest valuation.

Important Disclosure Information

Average Annual Total Returns as of 6/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Micro-Cap	15.79	8.87	12.75	13.76	7.50	10.33	12/31/91
Capital Micro-Cap	15.32	8.27	12.61	13.27	7.19	9.47	12/27/96
Micro-Cap Trust	15.02	8.64	13.24	13.38	9.25	10.58	12/14/93
Russell Microcap	15.51	13.40	8.61	9.30	6.03	N/A	N/A
Russell 2000	8.50	7.68	10.00	10.04	7.12	N/A	N/A

¹ Not annualized.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus prospectus prospectus prospectus.)

Royce Micro-Cap Trust is a closed-end registered investment company whose shares of common stock may trade at a discount to their net asset value. Shares of the Fund's common stock are also subject to the market risks of investing in the underlying portfolio securities held by the Fund.

Four Small-Caps for the Long Run

Sep 2, 2025 12:09:00 AM

As the small-cap market continues to rally, Chip Skinner and Miles Lewis each talk about two holdings that they think offer strong long-term opportunities.

Royce Smaller-Companies Growth Fund

A long-time holding, Freshpet

Freshpet (Nasdaq: FRPT)
12/31/24-7/31/25

Past performance is no guarantee of future results.

Limbach Holdings (Nasdaq: LMB) remains a stellar contributor, as management shifted the business from being heavily commercial HVAC equipment and hardware focused to more of a recurring revenue HVAC services business, which brings with it the higher margins, recurring revenue streams and growth re-acceleration that investors love seeing. Limbach also has a long runway of growth ahead, as it increases its presence in current markets while also acquiring other service-oriented providers

Limbach Holdings (Nasdaq: LMB)
12/31/24-7/31/25

Past performance is no guarantee of future results.

Royce Small-Cap Total Return Fund and Royce SMid-Cap Total Return Fund

12/31/24-7/31/25

Past performance is no guarantee of future results.

Kyndryl Holdings

Kyndryl Holdings (NYSE: KD)
12/31/24-7/31/25

Past performance is no guarantee of future results.

Important Disclosure Information

Average Annual Total Returns as of 7/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Smaller-Companies Growth	0.98	16.98	13.20	9.51	7.78	10.53	06/14/01
Small-Cap Total Return	0.82	-2.02	7.69	12.27	8.16	9.97	12/15/93
SMid-Cap Total Return	1.62	3.16	13.84	12.99	8.85	8.76	05/03/04
Russell 2000 Growth	1.70	3.15	9.09	7.06	7.27	N/A	N/A
Russell 2000	1.73	-0.55	7.03	9.81	7.43	N/A	N/A
Russell 2000 Value	1.77	-4.27	4.80	12.41	7.20	N/A	N/A
Russell 2500	1.93	4.28	8.40	11.00	8.61	N/A	N/A
Russell 2500 Value	1.74	3.97	7.95	13.67	8.08	N/A	N/A

¹ Not annualized.

Royce Smaller-Companies Growth Fund Service Class at or below 1.49%
Royce SMid-Cap Total Return Fund Service Class at or below 1.34%

Percentage of Fund Holdings As of 6/30/25 (%)

	Smaller-Companies Growth	Small-Cap Total Return	SMid-Cap Total Return
Freshpet	0.9	0.0	0.0
Limbach Holdings	2.9	0.0	0.0
	0.0	3.1	3.5
Kyndryl Holdings	0.0	2.3	3.5

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus prospectus.)

The Stealth Summer for Small-Caps

Aug 26, 2025 12:08:00 AM

Lost among the daily headlines centered on economic uncertainty, geopolitical worries, and new highs in the large-cap market, the recent outperformance of small-caps has gone mostly unnoticed. In fact, through 8/22/25, the Russell 2000 Index was outperforming the Russell 1000 Index for the third quarter to date and, more importantly in our view, since the tariff tirade lows of April 8th. The Russell 2000 was up 8.8% for the quarter-to-date versus 4.4% for the Russell 1000 (and 5.1% for the mega-cap Russell Top 50). From the 2025 market low on 4/8/25, the Russell 2000 advanced 34.8% versus 30.7% for the Russell 1000. Micro-caps did even better over the same period, with the Russell Microcap Index climbing 46.6%.

In addition, a number of our portfolio holdings have been buying smaller companies from private equity firms that need to sell, giving our companies the opportunity to pay attractively low prices for complementary businesses that have helped them take market share and potentially improve profitability.

Investors therefore appear to be seeking alternatives to the upper reaches of market capitalization in their asset allocations, seeing in small-caps both domestic and international highly promising long-term opportunities.

It is a trend we expect to continue!

Important Disclosure Information

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.)

Semiannual Letter: An Uncertain Short-Term Forecast for a Resilient Market

Aug 5, 2025 12:08:00 AM

Tale of Two Quarters

Russell Index Returns YTD through 6/30/25

Past performance is no guarantee of future results.

Low-Quality Has Led Early While High-Quality Has Led in the Second Year of Small-Cap Rebounds
Average Russell 2000 ROE Quintile Performance Over the Last 25 Years, Including the Past Six Drawdown Periods and Past Five Recoveries1 as of 6/30/25

¹There is one less period for the recoveries as the most recent cycle had not reached a new peak as of 6/30/25.
Past performance is no guarantee of future results.

Volatility Is an Ally

^nd

Certainly Uncertain

Then there was the mixed bag of economic data that the Fed outlined when announcing in late July that interest rates would hold steady until at least September. In its statement on July 30 ^th

^st

Four Charts Outline an Optimistic Small-Cap Forecast

Yet there are also bright spots: the effects of reshoring, reindustrializing, and infrastructure improvements have not yet reached their respective ends. And as we mentioned above, both the capital markets and economy proved remarkably resilient throughout the challenging first half of 2025.

Relative Valuations for Small-Caps vs. Large-Caps Are Near Their Lowest in 25 Years

¹Enterprise Value/Earnings Before Interest and Taxes.
Source: FactSet

One-Year EPS Growth

Average Expected Earnings Growth for 2025-2026
Index Aggregate Estimated Two-Year EPS Growth

Average 12 Month Returns for the Russell 2000 During a Recovery Depending on Various Entry Points, 10/5/79-6/30/25

Past performance is no guarantee of future results.

Important Disclosure Information

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. The performance data and trends outlined in this article are presented for illustrative purposes only. Past performance is no guarantee of future results. Historical market trends are not necessarily indicative of future market movements. Investments in securities of micro-cap, small-cap, and/or mid-cap companies may involve considerably more risk than investments in securities of larger-cap companies. (Please see "Primary Risks for Fund Investors" in the prospectus.) Investments in foreign companies may be subject to different risks than investments in securities of U.S. companies, including adverse political, social, economic, or other developments that are unique to a particular country or region. (Please see "Investing in International Securities" in the prospectus.)

Royce Small-Cap Total Return—2Q25 Update and Outlook

Jul 29, 2025 12:07:00 AM

How did Royce Small-Cap Total Return Fund in 2Q25 and over longer-term periods?

Miles Lewis: The Fund

How did performance shake out at the sector and industry level in 2Q25?

Joe Hintz:

Jag Sriram:

Which holding contributed most in 2Q25?

ML: Healthcare Services Group

Which holding detracted most in the second quarter?

JH: Our top detractor was Vestis Corporation, which provides uniform rentals and workplace supplies in the U.S. and Canada. Its shares fell sharply in May when the company reported poor results for its fiscal second quarter, which included a cessation of its dividend and a down shift to negative earnings per share and led us to exit the position.

At the sector level, how did the Fund perform versus its benchmark?

JS:

How did the Fund perform at the sector level for the year-to-date period ended 6/30/25?

ML:

What were the biggest industry contributors and detractors in the year-to-date period?

JH:

Which holding detracted and contributed most from performance in the year-to-date period?

JS: There was a rare instance of the same two holdings being the top detractor and contributor: Vestis Corporation was the top detractor, and Healthcare Services Group was the top contributor.

JH: The disadvantage was attributable to stock selection. At the sector level, stock selection in Consumer Discretionary, a lack of exposure to Utilities, and stock selection in Industrials hurt relative results most while lower exposure (with an assist from stock selection) to Health Care, an underweight in Energy, and higher exposure to Financials were additive versus the Russell 2000 Value.

What is the outlook for the Fund?

JH: The second quarter regained much of the lost ground from the first quarter, as investors seemed to gain comfort despite continued U.S. policy and tariff uncertainty. However, underneath the surface there was a significant dispersion of returns across the market, with low-quality and high-beta driving much of the returns in the small-cap universe. Within the Russell 2000 Value, Information Technology led by a wide margin, with Materials following in a distant second place in the quarter. While the Fund has an overweight position within the IT sector, the strength of the sector within the small-cap value index came mostly from massive share price swings in more speculative growth-type companies with negative earnings. Given our focus on high-quality companies with strong financial characteristics, we would not expect to outperform in such a big risk-on market. (For reference, the Russell 2000 Value rallied 20.2% from the 4/8/25 bottom through the end of June.) We continue to hold a somewhat cautious view entering the third quarter.

ML:

Important Disclosure Information

Average Annual Total Returns as of 6/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Total Return	2.74	4.84	9.81	12.56	7.84	9.97	12/15/93
Russell 2000 Value	4.97	5.54	7.45	12.47	6.72	9.11	N/A
Russell 2000	8.50	7.68	10.00	10.04	7.12	8.56	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Operating expenses reflect the Fund's total annual operating expenses for the Investment Class as of the Fund's most current prospectus and include management fees, other expenses, and acquired fund fees and expenses. Acquired fund fees and expenses reflect the estimated amount of the fees and expenses incurred indirectly by the Fund through its investments in mutual funds and other investment companies.

Percentage of Fund Holdings As of 6/30/25 (%)

	Small-Cap Total Return
Healthcare Services Group	4.1
Vestis Corporation	0.0

Small-Cap Premier Quality Strategy—2Q25 Update and Outlook

Jul 22, 2025 12:07:00 AM

How did the Small-Cap Premier Quality Strategy perform in 2Q25 and over longer-term periods?

Steven McBoyle: The mutual fund we manage in the Strategy, Royce Premier Fund, advanced 6.7% for the quarter, lagging its small-cap benchmark, Russell 2000 Index, which was up 8.5% for the same period. However, the portfolio was ahead of the Russell 2000 for the year-to-date period ended 6/30/25, down -0.6% versus -1.8%. The Fund also outperformed its benchmark for the 10-, 20-, 25-, 30-year, and since inception (12/31/91) periods ended 6/30/25, while lagging for the 1-, 3-, and 5-year periods.

Andrew Palen:

Lauren Romeo:

What happened at the industry level in 2Q25?

LR:

Which position contributed most in 2Q25?

LR: Our biggest contributor in the second quarter was MKS

Which position detracted most in the quarter?

LR: That would be Enovis Corporation

How did the Fund perform compared to the Russell 2000 on a sector basis in 2Q25?

SM:

How did the Fund perform at the sector level for the year-to-date period ended 6/30/25?

AP:

What were the biggest industry contributors and detractors in the year-to-date period?

AP:

Which holding detracted most from performance in the year-to-date period?

SM: Enovis Corporation, which we discussed above.

Which holding contributed most for the year-to-date period ended 6/30/25

SM: Our top contributor at the position level in the year-to-date period was ESCO Technologies

LR:

What is your outlook?

SM:

Important Disclosure Information

Average Annual Total Returns as of 6/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	6.70	1.34	9.49	9.67	8.36	10.80	12/31/91
Russell 2000	8.50	7.68	10.00	10.04	7.12	9.04	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 6/30/25 (%)

	Premier
MKS	4.3
Enovis Corporation	2.7
ESCO Technologies	3.2

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Royce Small-Cap Fund—2Q25 Update and Outlook

Jul 15, 2025 12:07:00 AM

How did Royce Small-Cap Fund perform in 2Q25?

Lauren Romeo: The Fund advanced 9.4% for the quarter, outperforming its benchmark, Russell 2000 Index, which was up 8.5% for the same period.

How was performance for year-to-date through 6/30/25 and over longer-term periods?

Jay Kaplan: The Fund also beat the Russell 2000 for the year-to-date period ended 6/30/25, down -0.8% versus -1.8%, and maintained its long-term relative advantages outpacing the benchmark for the 3-, 5-, 10-, 20-, 25-, 30-, 35-, 40-, and 45-year periods ended 6/30/25. For the 1-year period, certain attributes that go into our selection process underperformed, such as high returns on invested capital, lagged the benchmark.

Andrew Palen:

What happened at the industry level in 2Q25?

LR:

At the sector level, what factors made the biggest impact relative to the benchmark in 2Q25?

ML: Lewis Our advantage over the benchmark was attributable to sector allocation decisions in the quarter. At the sector level, both stock selection and lower exposure to Health Care, stock selection in Financials, and a substantially lower weighting in Real Estate made the most significant positive impact versus the benchmark. Conversely, stock selection in Materials, Consumer Discretionary, and Industrials detracted most from relative quarterly results.

Steven McBoyle:

What about at the industry level?

ML:

AP:

Francis Gannon:

Important Disclosure Information

Average Annual Total Returns as of 6/30/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	45YR	DATE	ANNUAL OPERATING EXPENSES
Small-Cap	9.40	1.70	12.32	12.44	8.74	11.86	N/A
Russell 2000	8.50	7.68	10.00	10.04	7.12	N/A	N/A

¹ Not annualized.

Using Data and Avoiding Biases in Small-Cap Growth Investing

Jun 17, 2025 12:06:00 AM

There are 3 primary elements of my investment process that set it apart from other-small cap growth managers:

Letting tech-powered evidence, data collection, and analysis drive the investment process
Recognizing and integrating behavioral biases
Avoiding pitfalls and landmines

Tech-Powered Evidence, Data Collection, and Analysis Drive the Investment Process

All of this information helps me get a sense of where a company sits in its company life cycle, and whether it may be moving from one category to another, e.g., emerging into a more established growth phase or moving into a more mature stage of its life cycle.

Recognizing and Integrating Behavioral Biases

Some of the more common behavioral biases include:

Cognitive Bias

Herd Effect Bias is the tendency to follow the actions of a group, often while ignoring primary research, company fundamentals, or valuation.

Risk Aversion Bias is the tendency of investors to favor perceived low risk investments over higher risk ones.

Confirmation Bias

Avoiding Pitfalls and Landmines

Coveo Solutions

Important Disclosure Information

Average Annual Total Returns as of 3/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Smaller-Companies Growth	-7.24	3.50	2.38	13.54	6.79	9.97	06/14/01
Russell 2000 Growth	-11.12	-4.86	0.78	10.78	6.14	6.92	N/A
Russell 2000	-9.48	-4.01	0.52	13.27	6.30	7.50	N/A

¹ Not annualized.

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Gross operating expenses reflect the Fund's total gross annual operating expenses for the Investment Class and include management fees and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Investment Class's net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.02% through April 30, 2026.

Percentage of Fund Holdings As of 3/31/25 (%)

	Smaller-Companies Growth
Coveo Solutions	1.0

How a Quality Small-Cap Is Picking Up the M&A Pace, With an Assist from Private Equity Sellers

Jun 10, 2025 12:06:00 AM

Our Co-CIO, Francis Gannon recently penned a piece Lauren Romeo, Andrew Palen, and I look for in Royce Premier Fund

This immediately made us think of Quaker Houghton (NYSE: KWR), a long-time holding that produces, develops, and markets industrial chemical products, including heat treatment, metal forming, forging, and tin plating fluids, as well as cleaners, casting lubricants, greases, ground control agents, and metal rolling oils.

Quaker has demonstrated remarkable resilience despite facing significant headwinds in 2024 and so far in 2025. The company has navigated a challenging macroeconomic environment characterized by weaker industrial activity in certain key markets (such as the U.S. and Europe), fluctuating raw material costs, and customer production downtimes in the auto and metalworking industries. Even amid several quarters of declining industry volume trend, however, Quaker has effectively maintained stable volumes year-over-year and quarter-over-quarter, a testament to its strong execution and ability to secure new business wins across all regions of the globe.

FirstService / Roofing Corporation of America from private equity company, Soundcore Capital Partners ($413 million)
Colliers International Group / Englobe from mid-market private equity firm, Onex ($475 million)
Colliers International Group / Triovest
Kadant / Dynamic Sealing Tech ($55 million)
Haemonetics / Attune Medical ($160 million)
JBT-Marel / Marel ($3.9 billion)
Arcosa / Stavola ($1.2 billion)
Valvoline / Breeze Autocare from private equity firm, Greenbriar ($625m)
Stella Jones / Locweld ($85 million)

Important Disclosure Information

Average Annual Total Returns as of 3/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	-6.80	-9.08	2.37	12.30	7.56	10.67	12/31/91
Russell 2000	-9.48	-4.01	0.52	13.27	6.30	8.84	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 3/31/25 (%)

	Premier
Quaker Houghton	2.6
FirstService Corporation	3.1
Colliers International Group	2.6
Kadant	1.9
Haemonetics Corporation	2.1
JBT Marel	3.2
Arcosa	2.9
Valvoline	1.7
Stella-Jones	3.0

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Four Theme-Based Holdings in Our Small-Cap Opportunistic Value Strategy

Jun 3, 2025 12:06:00 AM

Kavitha Venkatraman: We have held CECO Environmental

Brendan Hartman: I chose Fox Factory Holding

Jim Harvey: I think IAC

Care.com, which generated $366 million in LTM revenue and $43 million in LTM Adjusted EBITDA
In addition, IAC has more than $800 million+ in net operating losses that can offset taxes on appreciated assets like MGM.

Jim Stoeffel: I like the turnaround potential for Advanced Auto Parts

Important Disclosure Information

Average Annual Total Returns as of 3/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE
Small-Cap Opportunity	-12.85	-8.59	0.01	20.21	8.16	11.19	11/19/96
Russell 2000 Value	-7.74	-3.12	0.05	15.31	6.07	8.51	N/A
Russell 2000	-9.48	-4.01	0.52	13.27	6.30	7.82	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 3/31/25 (%)

	Small-Cap Opportunity
CECO Environmental	0.7
IAC	0.7
Fox Factory Holding	0.2
Advance Auto Parts	0.5

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

Private Exit?

May 27, 2025 12:05:00 AM

A familiar narrative has it that the extraordinary growth of private equity over the past decade has led companies to stay private longer, leading in turn to the belief that the number of smaller public companies is declining. In fact, our research shows that most of the decline in publicly traded small-cap companies occurred prior to 2012 and had more to do with the regulatory changes brought on with Sarbanes Oxley than the growth in private equity. The number of companies has remained relatively constant other than the post-Covid spike in SPACs.

Declining Number of Public Companies?
Number of Securities from 6/30/99 through 3/31/25 ¹

¹
Nano-cap includes companies with market caps up to $100 Million. Micro-cap includes companies with market caps between $100 million and $1 billion. Small-cap includes companies with market caps between $1 Billion and $3 Billion.
Source: FactSet.

As an active manager in the small-cap space, we think it is also worth pointing out that many of the thousands of companies owned by private equity are over levered and lack earnings, all while purchase multiples have increased steadily over the years. To put that into perspective, of all the IPOs in the small cap space since 2020, more than 70% of the companies had no earnings.

Interestingly, if one thinks that a declining number of companies hurts returns, we would offer the Russell 1000 Growth Index as a counterpoint. At the end of 2019, the large-cap growth index consisted of 530 companies, a number that had fallen to 396 by the end of 2024. Over this same 5-year period ending 12/31/24, the index had an average annual total return of 18.6%.

Important Disclosure Information

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.)

How Small-Cap Premier Quality Investing Works

May 20, 2025 12:05:00 AM

Royce Premier Fund

What are the primary attributes you look for in our Small-Cap Premier Quality Strategy?

Steven McBoyle, Andrew Palen Premier

How do you go about screening or otherwise finding companies with these qualities?

Can you discuss a few holdings in which you have high long-term confidence?

Stella-Jones

We think the long-term growth and cash flow power for many of our holdings is further bolstered by favorable secular growth trends that should outlast the depressive impact on demand of a more punitive global tariff regime. Here are two examples: Arcosa

JBT Marel

What is your current outlook for the Strategy given how volatile and uncertain the markets have been so far in 2025?

Premier

Important Disclosure Information

Average Annual Total Returns as of 3/31/2025 (%)

	QTD ¹	1YR	3YR	5YR	10YR	SINCE INCEPT.	DATE	ANNUAL OPERATING EXPENSES
Premier	-6.80	-9.08	2.37	12.30	7.56	10.67	12/31/91
Russell 2000	-9.48	-4.01	0.52	13.27	6.30	8.84	N/A

¹ Not annualized.

Percentage of Fund Holdings As of 3/31/25 (%)

	Premier
Stella-Jones	3.0
Arcosa	2.9
JBT Marel	3.2

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. The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also generally invests a significant portion of its assets in a limited number of stocks, which may involve considerably more risk than a more broadly diversified portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus.) The Fund may invest up to 25% of its net assets (measured at the time of investment) in securities of companies headquartered in foreign countries, which may involve political, economic, currency, and other risks not encountered in U.S. investments. (Please see "Investing in Foreign Securities" in the prospectus.

Royce Global Trust Manager Commentary

Aug 12, 2025 12:08:00 AM

Fund Performance

For the year-to-date period ended 6/30/25, Royce Global Trust advanced 13.4% on a (NAV) basis and 12.2% based on its market price versus a gain of 7.9% for its benchmark, the MSCI ACWI Small Cap Index. The Fund also beat its benchmark on both an NAV and market price basis for the 3- and 10-year periods ended 6/30/25. In addition, the Fund also outpaced the MSCI ACWI Small Cap on an NAV basis for the 1-year period ended 6/30/25 while trailing the benchmark on an NAV and market price basis for the 5-year period.

Tel Aviv Stock Exchange

Headquartered in Canada, Sprott

Based in Norway, Protector Forsikring

Alamos Gold

Another Israel-based position, Phoenix Holdings

FTAI Aviation

Also based in the U.S., Innospec

Transcat provides test, measurement, and calibration services with mission-critical applications in life sciences, aerospace, and industrial end markets. Its shares declined in the first half of 2025 as investors reacted to softer-than-expected margins and longer-than-anticipated integration of recent acquisitions. Slower ramp in acquired lab productivity and near-term dilution from capacity investments weighed on profitability, despite resilient top-line trends. Increased competition in certain industrial markets also pressured pricing, while the pace of calibration demand in discretionary sectors moderated. The stock also lagged amid a broader rotation out of smaller-cap industrial services names with elevated near-term cost pressures.

Viper Energy

Cellebrite DI

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Current Positioning and Outlook

]]> Important Performance, Expense and Disclosure Information

Important Performance and Expense Information

www.royceinvest.com. 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

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This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus prospectus.)

Royce SMid-Cap Total Return Fund Manager Commentary

Aug 12, 2025 12:08:00 AM

Fund Performance

Royce SMid-Cap Total Return Fund (formerly Royce Dividend Value Fund) was down -0.6% for the year-to-date period ended 6/30/25, trailing its SMID-cap benchmark, the Russell 2500 Index, which gained 0.4% for the same period. Longer-term results, however, were much better, as the Fund outperformed its benchmark for the 1-, 3-, 5-, 10 and 20-year periods ended 6/30/25. The Fund also beat the Russell 2500 Value Index for the 1-, 3-, 10-, 20-year, and since inception periods ended 6/30/25.

Semiconductor assembly specialist Kulicke and Soffa

Our third biggest detractor was Quaker Houghton

Charles River Laboratories International

The fifth biggest detractor was home and personal care products provider,

The position that made the biggest positive impact on first-half performance was futures commission merchant, Marex Group

Kyndryl Holdings

Next came Worthington Enterprises, which designs and manufactures market-leading brands focused on Building Products (cooking, heating, cooling, water solutions, architectural and acoustical grid ceilings, and metal framing) and Consumer Products (tools, outdoor living, and celebrations). Its strong performance was rooted in earnings growth and strong free cash flow in fiscal 2025 as Worthington delivered robust results in both Consumer and Building Products segments, driven by volume growth, disciplined cost management, and successful acquisitions. Management also increased the quarterly dividend by 12% while continuing to repurchase shares, reflecting their confidence in future growth and shareholder returns.

AerCap

Axis Capital Holdings

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Current Positioning and Outlook

]]> Important Performance, Expense and Disclosure Information

Important Performance and Expense Information

All performance information reflects past performance, is presented on a total return basis, reflects the reinvestment of distributions, and does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Current month-end performance may be higher or lower than performance quoted and may be obtained at www.royceinvest.com. Gross operating expenses reflect the Fund's total gross annual operating expenses for the Service Class and include management fees, 12b-1 distribution and service fees, and other expenses. Net operating expenses reflect contractual fee waivers and/or expense reimbursements. All expense information is reported as of the Fund's most current prospectus. Royce has contractually agreed, without right of termination, to waive fees and/or reimburse expenses to the extent necessary to maintain the Service Class's net annual operating expenses (excluding brokerage commissions, taxes, interest, litigation expenses, acquired fund fees and expenses, and other expenses not borne in the ordinary course of business) at or below 1.34% through April 30, 2026.

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, 2025, 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, 2025 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.

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-the Funds’ future operating results,

-the prospects of the Funds’ portfolio companies,

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

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.)

Royce Small-Cap Trust Manager Commentary

Aug 18, 2025 12:08:00 AM

Fund Performance

Royce Small-Cap TrustThe Fund also outperformed the Russell 2000 on both an NAV and market price basis for the 1-, 3-, 5-, 10-, 15-, 25-, 30-, 35-year, and since inception (11/26/86) periods ended 6/30/25 (while also beating it on an NAV basis for the 20-year period).

IES Holdings

TransMedics Group

Corcept Therapeutics

E-L Financial operates as an investment and insurance holding company in Canada in two segments, E-L Corporate and Empire Life. Management implemented a 100-for-1 stock split in May 2025, which made the stock more accessible to a wider range of investors while potentially increasing liquidity. Robust growth in revenue and profitability, combined with a low-debt balance sheet, seemed to draw more investors to its shares.

APi Group

The top detractor at the position level was Enovis Corporation

Ziff Davis

Azenta, another large detractor, provides automated cold storage solutions for biological and chemical compound samples while also focusing on genomic analysis and the management and care of biological samples used in pharmaceutical, biotech, healthcare, clinical, and academic research, and development markets. The company has struggled to meet revenue and earnings targets, though it does have a low-debt balance sheet and ample cash, so we held our shares at the end of June.

Impinj

Vestis Corporation

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Current Positioning and Outlook

]]> Important Performance, Expense, and Disclosure Information

Important Performance and Expense Information

All performance information reflects past performance, is presented on a total return basis, net of the Fund's investment advisory fee, 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 recent month-end may be obtained at www.royceinvest.com. 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 micro-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

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-the Funds’ future operating results,

-the prospects of the Funds’ portfolio companies,

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

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.)

Royce Small-Cap Fund Manager Commentary

Aug 12, 2025 12:08:00 AM

Fund Performance

Royce Small-Cap Fund beat its small-cap benchmark, the Russell 2000 Index, for the year-to-date period ended 6/30/25, down -0.8% versus -1.8%, while also beating the small-cap index for the 3-, 5-, 10-, 20-, 25-, 30-, 35-, 40-year and 45-year periods ended 6/30/25. For the 1-year period, certain attributes that go into our selection process, such as high returns on invested capital, underperformed and lagged the benchmark.

The top detractor at the position level was Onto Innovation

Enovis Corporation

Ziff Davis

Rogers Corporation

Myriad factors hurt the shares of Computer Modelling Group

TransMedics Group

Air Lease

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Current Positioning and Outlook

]]> Important Performance, Expense, and Disclosure Information

Important Performance and Expense Information

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

Notes to Performance and Other Important Information

]]>

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus prospectus.)