The Royce Small-Cap Total Return Fund (RYTRX) gained 2.4% in fiscal year 2025, underperforming its benchmark, the Russell 2000 Value Index, which rose 12.6%. Positive contributions came from health care, financials, and information technology sectors, while holdings like PACS Group and FTAI drove gains. Vestis Corporation emerged as the top detractor amid weaker results.
The Royce Small-Cap Total Return Fund reported a 2.4% advance for the calendar year 2025, trailing the Russell 2000 Value Index's 12.6% gain. Despite the underperformance in the short term, the fund has outperformed the benchmark over longer periods.
Three of the fund's 10 equity sectors contributed positively to performance. Health Care and Financials led by wide margins, with Information Technology following. At the position level, PACS Group, a skilled nursing facility operator with more than 300 affiliated post-acute facilities, was the top contributor. The company reported stronger-than-expected fiscal 2024 and year-to-date fiscal 2025 results in November 2025, indicating its acquisition and operating models remained on track.
FTAI shares significantly outperformed, driven by robust demand for passenger flights and the acquisition of a new repair facility in Rome, which strengthened its competitive moat. Healthcare Services Group also performed well, achieving its best quarterly revenue and cash flow in five years, alongside significant growth in the housekeeping segment.
On the downside, Vestis Corporation, a provider of uniform rentals and workplace supplies in the U.S. and Canada, was the top detractor. It reported significantly lower results for the second quarter of 2025, revised down its full-year 2025 guidance, and offered weak outlook for the third quarter.
Fund managers expressed optimism, stating that both small-cap quality and value are poised for meaningful rebounds in 2026.
