Global Smaller Companies 16 November 2022
This is a non-independent marketing communication commissioned by Columbia Threadneedle Investments. 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.
To secure high total return by investing in smaller companies worldwide.
Source: Morningstar, JPMorgan Cazenove
Global Smaller Companies
Columbia Threadneedle Management Limited
Association of Investment Companies (AIC) Sector
Global Smaller Companies
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
Global Smaller Companies Trust (GSCT) is run by long-standing lead manager Peter Ewins, supported by a well-resourced team. As discussed in Management, the result of the 2021 acquisition of BMO’s EMEA Asset Management business by Ameriprise Financial provides the team with access to the wider analytical resources that Columbia Threadneedle Investments provides.
GSCT offers an exposure to a diverse range of global smaller companies by taking a balanced, yet total returns-focussed approach, to identify high-quality opportunities. This is achieved through direct equity exposures and through funds, which Peter employs for access to regions such as emerging markets, Asia and Japan - areas where, historically, BMO had lacked depth on the small-cap research side.
Peter‘s ‘quality growth at a reasonable price’ philosophy and awareness of the importance of valuation has resulted in GSCT’s outperformance of the global smaller companies’ peer group this year to date. In part, this can be attributed to the trust’s relatively low exposure to speculative areas of the market and significant allocation to US dollar assets. Over the long term, Performance has remained broadly in line with the peer group, which is a testament to the team’s stock picking and portfolio management abilities during a period which has favoured growthier strategies.
GSCT is the only trust in its sector to pay a dividend and currently yields 1.2%, after 52 consecutive years of dividend growth. GSCT’s board favours the cautious use of structural Gearing and net gearing is currently 3%. At the time of writing, GSCT trades on a historically-wide Discount of 10.6%.
Small cap-focussed strategies have found it challenging compared to large caps since the start of 2022 and GSCT has been unable to avoid this broader sell-off. However, GSCT’s strategy is diversified across geographies and sectors, and we believe this more balanced approach, relative to its peers, may leave Peter less exposed to any single, geopolitical risk and structural risks affecting the markets at present. Furthermore, the valuation-sensitive approach used to identify high-quality businesses at reasonable prices may fare better in this higher inflation, higher interest rate environment compared to more speculative, high-growth strategies.
We believe that GSCT benefits from the significant contribution to investment ideas from all members of the experienced Global Small Cap team, who have remained together following the acquisition by Ameriprise (Columbia Threadneedle Investments (CTI) parent company), rather than a single portfolio manager making all stock decisions. In addition, communication with CTI’s wider investment team has increased as the integration process has progressed. In addition, Peter’s use of external fund managers taps into the specialist regional knowledge required to deliver successful investor outcomes, as has been demonstrated by good performance in the trust’s 2022/23 financial year to date by the Japanese, Asian and emerging markets’ funds.
Along with the added bonus of a progressive dividend policy, GSCT now trades at a historically-wide discount compared to its long-term average which may prove an attractive entry point in itself for long-term investors.
- Discount significantly wider than long-term average
- Expanded resources following the acquisition of the manager
- Differentiated exposure to geographical regions compared to peers
- Challenging economic environment for small caps and the UK
- Reliance on external managers for some regional exposure leads to additional manager risk
- Valuation-sensitivity may lead to underperformance in growth-driven markets