Updated 18 May 2021
Save Article Download

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Brown Advisory US Smaller Companies. 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.

It’s no secret that the investment trust structure brings with it several benefits. The ability to use leverage to gain greater access to the market at favourable points. The listed structure that offers liquidity regardless of the assets invested in. And an independent board, acting on behalf of shareholders to ensure the trust is run as well as possible.

Often the work that boards do is relatively subtle, involving regularly checking in with fund managers and other service providers to ensure that things are running smoothly.

But sometimes boards have to act decisively in the interests of their shareholders. That is exactly what happened in the case of Brown Advisory US Smaller Companies (BASC) – the trust formerly known as Jupiter US Smaller Companies (JUS).

Following the retirement of long-standing Jupiter fund manager Robert Siddles, the trust’s board opted to reallocate the fund’s mandate to a different investment house entirely.

While Brown Advisory is not a household name in the UK, the American company has a rich, 27-year history within US smaller companies investing, making the transition an exciting prospect for current – and potential – investors in BASC.

Established pedigree

BASC’s manager, Chris Berrier, has a long track record of successfully investing in US smaller companies. He has run Brown Advisory’s US Small-Cap Growth strategy, which BASC’s portfolio will resemble, for over 15 years. In doing so, he is backed by an unusually extensive investment team of over 50 analysts and investment professionals.

Since the UCITS version of the fund was launched in November 2007, it has returned 11.5% per annum, versus a 10.8% return for the Russell 2000 Growth and a 9.9% return for the Russell 2000 (to 30 April 2021). Consistently generating alpha (a measure which shows the added value of active management) like this has been particularly challenging in US markets over the last decade, as a lopsided market has been fuelled by a very select group of sectors. As a result, these figures stand out.

However, while alpha returns are important, unusually for a fund in this sector, the team also prioritises downside risk management.

This means that when markets fall, they seek to build a portfolio that will not fall as far, a valuable quality at a time when valuations are going through a tumultuous period and the economic outlook is far from clear. Over the period since the UCITS fund’s creation, the fund’s downside capture has been 84, meaning that its value declined only 84% as much as the index during that period.

The opportunity on the table

With US government support still at heightened levels and looking likely to continue for some time to come, combined with an economy that is rapidly unlocking as its vaccination programme gathers pace, the outlook for US smaller companies as a whole could be positive in the short-to-medium term.

It is worth noting that US smaller companies are very different to those found in the UK. For a start, they are significantly larger with many large enough to qualify for the FTSE 100 were they to be listed in the UK. As a result, the index contains several well-known multinational brands, such as BASC portfolio holding Bright Horizons Family Solutions, a childcare provider operating in multiple territories including the UK and Ireland. A similarly well-known holding is Zynga, a games developer responsible for popular mobile games including FarmVille and Words with Friends.

From a universe of 2000 companies, the team sources a portfolio of circa 60-80 long-term investment opportunities by focusing on what the team describe as ‘3G’ characteristics. In reality this means they look for companies that have durable growth, sound governance and scalable go-to-market strategies. As a result, the portfolio is made up of companies that are leaders in their sectors or that are rapidly growing market share, with clearly differentiated business models. Ideally, investee businesses would also see their margins grow as they scale up.

Combined, this approach results in a portfolio of companies with strong long-term growth potential, which the manager aims to capture by holding them throughout this growth trajectory. This approach should also reduce costs, by limiting trading within the portfolio.

In safe hands

While a change in manager can be unnerving for investors, having an investment trust board in place to act on behalf of shareholders means that any such change is driven by the right motivations. Reassuringly for investors, with the team’s strong track record and established process, Brown Advisory has demonstrated that it knows what it’s doing in the US smaller companies space.

Login the access the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.