Fund Profile

BMO Global Smaller Companies 16 February 2022


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BMO Global Smaller Companies (BGSC) offers investors a portfolio of global small-cap companies. Run by lead manager Peter Ewins, who works closely with the wider BMO Global small-cap team in constructing BGSC’s portfolio, the trust has a focus on identifying high quality companies with a ‘growth at a reasonable price’ (GARP) mindset. We think BGSC’s strong bias to the quality factor may put it in a favourable position for the coming inflationary environment. Peter is particularly concerned about the impact this change in market backdrop might have on very highly valued companies, as well as on those which may see their margins squeezed due to rising prices. He notes that high-quality companies which trade on reasonable valuations are likely to avoid said pressures, as we describe in detail in the Portfolio section.

While BGSC has underperformed its peers over the long term, in part due to its large UK allocation and avoidance of expensive growth stocks, it has been able to generate substantial outperformance over the last 12 months because the team’s valuation sensitivity has insulated the trust from the recent bear market. As we point out in the Performance section, BGSC’s ability to leverage ideas from an experienced team of smaller company portfolio managers has allowed it to benefit from a number of companies more than doubling in value over the last 12 months, many of which have been major drivers of BGSC’s recent returns.

BGSC currently trades on a 7.1% Discount, which is wider than its long-term average and wider than its peer group’s weighted average discount. Despite BGSC’s small-cap focus, it also has one of the longest track records of consecutive Dividend increases of any investment trust, at 51 years. It is also the only trust to pay a dividend in its sector, currently yielding 1.1%.

Analyst's View

We believe that one of the key attractions of BGSC is its consistent application of a ‘growth at a reasonable price’ strategy. While this would have been a headwind for BGSC during 2020 when lower quality and more volatile growth stocks led the market, we believe that the current bear market is vindicating the team’s uncompromising approach. BGSC’s avoidance of both stretched valuations and companies whose balance sheets could be meaningfully impacted by rising inflation means we think the trust is currently much better positioned than peers with a lesser focus on quality.

While we think BGSC’s attractions are clear for valuation-conscious investors or those looking for investments better suited to a rising interest rate environment, we believe that the trust also has potential as a ‘one-stop shop’ solution to global small-cap investing. Given BGSC’s truly global remit and relatively balanced portfolio compared to peers, it offers investors exposure to a wide range of small caps, despite having a structural bias to the UK, where the weighting has been over 25% through 2021.

Given that both UK equities and core strategies have seen a resurgence in performance, we believe that BGSC’s current discount offers an attractive entry point. We also note that despite Peter’s valuation-conscious approach being relatively well positioned for the current inflationary environment, BGSC still trades at wider than its long-term average discount.

bull bear
GARP approach to quality small-cap investing may position the trust well for the current market
Gearing, though modest, can enhance losses on the downside
Fully utilises the experience and views of a range of professional investment managers
Can underperform in markets driven by high-growth or deep-value stocks
Discount may offer an attractive entry point
Despite its long dividend track record, its yield may be too low for high-income investors
Continue to Portfolio

Fund History

17 Jun 2024 Global Smaller Companies Trust
Nish Patel
Join this webinar as part of our week-long June online series 'Small caps - a lost decade' hosted by the team at Kepler Trust Intelligence...
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29 May 2024 It’s a small world after all
A recent rally in smaller companies could be the start of a long-term recovery…
17 Apr 2024 Pretty, pretty, pretty good
Do investment trusts really protect capital and income against inflation? Let's take a look…
09 Feb 2024 Fund Analysis
GSCT has delivered sector-leading performance over three years…
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
23 Aug 2023 Halfway there…investing on a prayer
We provide an update on our picks for 2023 and see which analysts' prayers are being answered…
02 Aug 2023 Fund Analysis
GSCT’s historically wide discount may offer great long-term value…
19 Apr 2023 Are we nearly there yet?
We look at which trusts have done best year to date, and ask where there may be value…
13 Apr 2023 Far from the madding crowd
Smaller nimble companies, both public and private, may be best placed to navigate the current environment…
04 Jan 2023 Here we go again
We review our ‘top picks’ for what was a wild year and place our bets for the year ahead – which doesn’t look much calmer…
23 Nov 2022 Guns n’ roses
A sustainable future for the free world may depend on investments in weapons and oil as well as traditional ESG friendly assets…
16 Nov 2022 Fund Analysis
GSCT’s high-quality, valuation-sensitive approach may prove to be more resilient over the medium term…
13 Jul 2022 Ready player one
We wonder where, if anywhere, should investors look for returns after a tumultuous first half of the year…
16 Feb 2022 Fund Analysis
BGSC’s valuation-sensitive approach has led to strong recent outperformance…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
19 Jul 2021 Fund Analysis
BGSC is one of the few trusts to offer a truly diversified approach to global small caps, with an attractive discount and incoming tailwinds...
11 Nov 2020 Fund Analysis
BGSC offers investors access to a diversified portfolio of global small caps on a discount…
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
14 Jan 2020 Fund Analysis
BGSC is a long-term favourite in the smaller companies universe that has recently slipped to a discount…
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