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Fund Profile

Global Smaller Companies 16 November 2022

Disclaimer

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.

Overview
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Overview

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%.

Analyst's View

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.

Bull

  • Discount significantly wider than long-term average
  • Expanded resources following the acquisition of the manager
  • Differentiated exposure to geographical regions compared to peers

Bear

  • 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
Continue to Portfolio

Fund History

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…
View all

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