Fund Profile

Brown Advisory US Smaller Companies 01 July 2022

Disclaimer

This is a non-independent marketing communication commissioned by Brown Advisory. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
BASC’s wide discount could prove an interesting long-term entry point…
Overview

Brown Advisory US Smaller Companies (BASC) offers access to a portfolio of high-quality growth companies in the US small cap market, which brings exposure to the long-term growth potential in the dynamic US economy.

The portfolio is managed by Chris Berrier of Brown Advisory, who took over management responsibilities on 01/04/2021. As we discuss under Performance, Chris’ long-term track record running similar strategies is outstanding. In particular, while outperforming his funds have tended to display a low beta and less downside sensitivity than the market. This has led to the trust holding up much better than the Russell 2000 Growth Index in the sell-off seen this year.

Chris aims to find companies which can display the ‘3G’ characteristics of Growth, Governance and scalable Go-to-market. He avoids loss-making and speculative businesses, which has been key to outperforming the Russell 2000 Growth Index this year.

It has been a bad year for markets, with high inflation and the Russian invasion of Ukraine being key reasons. BASC’s Discount has widened out to c. 13%, compared to a five-year average of c. 9%. BASC’s discount is one of the widest in the combined peer group of US large and small cap strategies, despite the good long-term track record of the manager. Chris tells us that valuations have already become much more interesting in a number of areas of the market, and he is looking to put some cash to work in defensive tech and healthcare companies which have sold off. That said he is not trying to call the market, but taking a long-term view on the companies’ prospects.

Kepler View

We think Chris’ long-term track record is impressive and BASC offers an intriguing way to get access to the long-term growth potential in the US, the world’s largest economy and the major source of creativity and dynamism. Chris’ success seems based on a repeatable process, with a clear definition of the sort of company in which he seeks to invest, which gives us some comfort that his alpha-generation could be repeatable too.

Turning to the short-term, this has been a bad year for growth investing, but BASC has held up well thanks to the focus on quality and resilience baked into Chris’ strategy. The immediate outlook for markets looks troubled, but the wide share price discount looks ever more interesting, as is the fact Chris is starting to find attractively valued opportunities in some of the areas that have sold off. Chris acknowledges a wide range of outcomes is still possible in the coming months, but he is confident enough to be putting some cash to work. Even though the shake-out has been worst felt in unprofitable businesses, Chris believes it should provide opportunities in high-quality businesses as some investors are forced to exit indiscriminately and some high-quality companies fall back into the small cap space as the market cap shrinks. There is also the potential for M&A as companies look to take advantage of each others’ weaknesses, and this could provide a diversified source of returns.

Bull

  • Excellent long-term track record in a tough market for active managers
  • One of few trusts to focus on a high growth market with lots of long-term secular growth stories
  • Discount could represent good long-term entry point

Bear

  • Stylistic tilt to growth could lead to underperformance if value outperforms
  • Small-caps could underperform if the US enters a recession
  • Low beta means may not keep up with the market in sharp rallies
Continue to Portfolio

Fund History

01 Jul 2022 Fund Analysis
BASC’s wide discount could prove an interesting long-term entry point…
17 Mar 2022 It's the end of the world as we know it
We examine five potential themes for investors seeking long-term returns in a troubled and uncertain world...
26 Nov 2021 Fund Analysis
BASC has performed strongly under its new manager…
17 Nov 2021 How Do You Like Them Apples
Judging whether the US market is expensive is not as easy as many make it out to be…
02 Nov 2021 Results analysis: Brown Advisory US Smaller Companies
BASC has made a solid start under the new manager, generating significant outperformance….
06 Oct 2021 Slides and Audio: Brown Advisory US Smaller Companies
Download the presentation and listen to the audio from our 'Now that's what I call a discount!' Autumn conference on 30 September...
23 Sep 2021 Now that's what I call a discount 2021!
For the second year running we examine trusts on discounts which, in our view, don't make sense...
15 Sep 2021 Bargains galore
We review our discounted opportunities portfolio, with one constituent rallying more than 30% in just two months…
30 Apr 2021 Slides and Audio: Jupiter US Smaller Companies
Our research team at Kepler Trust Intelligence hosted a Q&A webinar with Chris Berrier, the new lead manager of the trust at Brown Advisory...
28 Apr 2021 Fund Analysis
JUS’s new manager brings a new strategy, and scope for the discount to narrow…
22 Apr 2021 FAANGs for the memories
The massive outperformance of mega-cap tech last year could become a thing of the past if anti-trust legislation and negative sentiment starts to bite...
09 Dec 2020 Flash update: Jupiter US Smaller Companies
Brown Advisory has been appointed to manage Jupiter US Smaller Companies, utilizing their small cap growth strategy…
13 May 2020 Sea change
While global giants like Amazon still hold the weather gauge, we examine the long term prospects for a shift in the prevailing wind...
11 Sep 2019 Nanny knows best: how regulation is influencing returns
New research suggests disruption is threatened by increased regulation, with clear consequences for investment strategists...
14 May 2019 Fund Analysis
Jupiter US Smaller Companies Trust, run by Robert Siddles for the past 18 years, looks to invest in the areas of the market that lacks positive sentiment...
31 Oct 2018 The Trump effect
Two years after the shock election of Donald Trump, we take a look at what the Trump administration has really meant for US markets and the trusts that invest in them...
30 Oct 2018 Fund Analysis
Performance has been dull over the medium term, however, 2018 has seen an extraordinary turnaround for the trust...
26 Apr 2018 The $23.9 trillion dollar question*
Are US equities, which have hit record highs on 71 occasions in the last 12 months, overpriced or are they actually trading at a price worth paying?
20 Apr 2018 Fund Analysis
The trust aims to achieve long-term capital growth for shareholders from a diversified portfolio primarily of quoted US smaller and medium-sized companies.
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