Discount Opportunities in Royce Micro-Cap Trust (RMT): A Value-Driven Entry Point in Micro-Cap Closed-End Funds

The Royce Micro-Cap Trust (RMT), a closed-end fund specializing in micro-cap equities, has long traded at a discount to its net asset value (NAV). As of September 30, 2025, RMT was priced at $10.39 per share, compared to an NAV of $11.77, representing an 11.7% discount, according to Marketscreener. This discount, while narrower than the five-year average of -12.12% per CEFConnect, remains significant and offers a compelling value proposition for investors seeking exposure to undervalued micro-cap stocks.

Historical Discount Trends: A Consistent Pattern

RMT's discount to NAV has persisted for years, with fluctuations reflecting broader market sentiment and fund-specific dynamics. For instance, in June 2025 the discount widened to 12.4% ($10.56 NAV vs. $9.25 market price), as reported by StockTitan, while in April 2025 it stood at 10.03% ($9.37 NAV vs. $8.43 market price). Over the past five years, the fund's average discount has ranged between 11.72% and 12.12%, according to CEFConnect, indicating a stable, albeit cyclical, pattern. This consistency suggests that RMT's discount is not a temporary anomaly but a structural feature tied to its niche focus on micro-cap stocks, which often face liquidity challenges and market skepticism.

Performance and Leverage: A Strong Foundation

Despite the discount, RMT has delivered robust returns. Its NAV has grown at an average annual rate of 14.07% over five years, outpacing the market price's 15.48% return, according to Marketscreener. This implies that the fund's underlying assets have appreciated meaningfully, even as the market price lagged. Additionally, RMT maintains conservative leverage, with net leverage at 2.4% as of September 2025, per StockTitan, minimizing the risk of forced asset sales during market downturns.

Why the Discount Persists-and Why It Matters

Closed-end funds like RMT often trade at discounts due to factors such as market sentiment, portfolio complexity, and liquidity constraints. For RMT, its focus on micro-cap stocks-companies with market capitalizations typically below $2 billion-amplifies these challenges. Micro-cap stocks are inherently less liquid and more volatile, making them less appealing to institutional investors who dominate the market for closed-end funds. This dynamic creates a persistent discount, which can act as a margin of safety for patient investors.

Moreover, RMT's discount has historically narrowed during periods of market optimism. For example, in 2020, the fund's NAV return of 31.04% outpaced its market price return of 28.23%, reflecting a narrowing discount as investors flocked to risk assets, according to CEFConnect. A similar pattern could emerge if broader market conditions improve, making the current 11.7% discount an attractive entry point.

Conclusion: A Strategic Value Play

For value-driven investors, RMT's current discount offers a unique opportunity. The fund's strong NAV growth, conservative leverage, and consistent discount history suggest that the market is underpricing its assets. While micro-cap investing carries inherent risks, RMT's disciplined approach-diversifying across sectors like Industrials, Information Technology, and Financials, according to the Royce Micro-Cap Trust page-mitigates some of these concerns. Investors willing to tolerate short-term volatility may find RMT's current discount a compelling way to access high-growth micro-cap equities at a meaningful discount to intrinsic value.