Semiannual Letter: How Small-Cap Can Navigate Sustained Leadership ↗Small-cap equities are argued to retain market leadership because earnings growth, relative valuations, and a historically low share of the Russell 3000 still favor the asset class. Royce expects volatility from geopolitical conflict, inflation, and weakening consumers, while finding opportunities in health care, consumer sectors, AI infrastructure, and selected software companies.first half of 2026 ——
Royce Small-Cap Fund Manager Commentary ↗Royce Small-Cap Fund favored semiconductor and infrastructure suppliers including Element Solutions, Onto Innovation, MKS, Ultra Clean Holdings, and Arcosa. It exited PAR Technology, ADMA Biologics, Kyndryl Holdings, and TransMedics after deteriorating theses, while adding to Maximus on what it viewed as an attractive valuation.year-to-date period ended 6/30/26 +23.8%ACA$7.1BADMA$2.3BESI$8.5BKD$2.8B
Royce Micro-Cap Fund Manager Commentary ↗Royce Micro-Cap Fund emphasized AI-infrastructure suppliers Ichor Holdings, Ultra Clean Holdings, Applied Optoelectronics, Vishay Precision Group, and Cohu. The managers exited PAR Technology and Forward Air, added to PowerFleet and EVI Industries, and began reallocating technology winners toward undervalued staffing, software, agriculture, commercial-vehicle, and medical-technology opportunities.first half of 2026 +45.4%AAOI$11BAIOT$409MAORT$1.4BCOHU$2.6B
Royce Premier Fund Manager Commentary ↗Royce Premier Fund credited MKS, Littelfuse, ESCO Technologies, Onto Innovation and RBC Bearings for technology and industrial strength, while Colliers, Morningstar, Exponent, TMX Group and ESAB detracted. The managers argue that quality small caps with durable moats, cash generation and high returns on invested capital should benefit after speculative leadership gives way to fundamentals.year-to-date period ended 6/30/26 +23.5%CIGI$5.5BESE$7.4BEXPO$3.3BLFUS$10B
