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Fund Profile

Standard Life UK Smaller Companies 19 February 2020


Disclosure – Independent Investment Research

This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.

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Standard Life UK Smaller Companies offers investors an actively managed, concentrated portfolio of high-quality growth stocks, with the aim of delivering long-term capital growth.

The manager, Harry Nimmo, looks to achieve this goal through a combination of quantitative and qualitative research; incorporating a proprietary scoring system called ‘the matrix’. The matrix assesses numerous metrics, narrowing down the number of companies which Harry will meet and enabling him to interrogate management and investigate the strength of the company’s business model. The end-result of Harry’s efforts is a portfolio of between 50 and 60 stocks, currently 54. The trust has a bias towards the upper end of the small-to-medium market cap range of companies, principally due to Harry’s preference for well established companies and his propensity to run his winners.

Over the long run, Harry’s track record is excellent. The past ten years has seen SLS outperform the benchmark in eight, including in both rising and falling markets. This strong performance has continued into recent times, and over the past 12 months the trust’s NAV has comfortably outperformed the sector and index. Over this period SLS also saw considerable levels of volatility, however; H219 was the strongest six months in NAV total return terms since the manager was appointed in 2003, while H119 was the worst since 2008.

SLS has seen a complete turnaround in sentiment over the past six months. Starting Q3 of 2019 on a discount of nearly 10%, the trust narrowed relentlessly to a premium by the year-end. This has since slipped and currently the trust is trading on a discount of 5.2%.

Analyst's View

SLS has an exceptional track record of delivering returns for investors. Harry’s unique, quant-based approach to investing means that he is able to remain objective, without biases or external influences impacting his investment decisions too much. This, coupled with the trust's concentrated nature, makes for a unique portfolio with the potential for strong and differentiated returns compared to that of the benchmark and peers.

Although Harry has a strong track record, investors should recognise that in the short term SLS can be a white-knuckle ride at times. This was seen in 2019 when SLS outperformed in all but one peer in the 25-strong AIC sector, but this was achieved with high levels of volatility. This result reflects characteristics one might expect from a manager who holds a concentrated portfolio and is willing to back his bets with conviction.

The trust's outperformance, coupled with an already wide discount, helped SLS come back into favour, and the discount narrowed significantly in the latter half of 2019. In 2020 the discount has started to widen in absolute terms and relative to the peer group.

bull bear
Highly experienced manager with a long-term track record of outperformance Concentrated approach increases the volatility of the trust
A unique combining strong quant screening coupled with a highly experienced manager The charges are above average in the peer group
Slipped to a discount in recent times despite strong performance and improved sentiment towards the sector
Continue to Portfolio

Fund History

20 May 2024 Fund Analysis
AUSC’s quality growth portfolio could benefit from a change in market style…
05 May 2020 Kepler Rated: Standard Life UK Smaller Companies
Run by Harry Nimmo, SLS offers investors a portfolio of high quality growth stocks...
19 Feb 2020 Fund Analysis
Currently trading at a discount to peers, SLS has an impressive long-term track record…
02 Jan 2019 Fund Analysis
Standard Life UK Smaller Companies has a relatively concentrated portfolio of quality growth stocks held for the long run...
12 Sep 2018 Fake news...
Small cap funds, despite their reputation to the contrary, are less volatile and have delivered better risk adjusted returns than their large cap peers...
19 Jun 2018 Pretty little things
Many smaller companies managers have been shifting into micro caps in 2018, should investors be following suit?
19 Jun 2018 Fund Analysis
A 'quality growth' focused small-cap trust with a long-term track record of outperformance and a buy and hold approach...
25 Oct 2017 Patience is a virtue…
We analyse the outperformance of UK small-caps and why it has been so important to take a long-term view...
13 Sep 2017 Big Issue(rs)
We highlight the UK equity trusts that have issued and bought back the most shares over the course of 2017 so far and how these actions have affected shareholders...
12 Jun 2017 MAYDAY!
As the Conservative party founders, we examine the impact of last week’s disastrous election on trusts...
07 Jun 2017 Omnishambles...
Given the huge levels of political-induced uncertainty, we analyse recent drivers and themes within the UK equity market ahead of the upcoming election
25 May 2017 An opportunity in UK small-caps?
We round up recent recommendations, results and analysis of the latest developments in the UK small-cap sector...
04 May 2017 Size matters
We highlight the potential liquidity and capacity constraints that could hinder open-ended UK smaller companies funds...
02 Mar 2017 Building confidence in private equity
SL Capital Partners' Roger Pim highlights the major changes within the Standard Life Private Equity Trust...
24 Nov 2016 Investment trusts vs OEICs: The definitive guide
We take a look at how investment trusts really stack up against their open-ended fund rivals...
09 May 2016 Building for success
Standard Life Investments Property Income Trust fund manager Jason Baggaley says UK property is at an inflection point...
04 May 2016 The ultimate arena for stockpicking
We examine funds which invest in smaller companies, which have invested their large cap peers over many decades...
23 Feb 2016 Nimmo warns that his trust’s ‘extraordinary returns’ are unlikely to last
Standard Life UK Smaller Companies investment trust manager Harry Nimmo thinks rotten investor sentiment will make 2016 a difficult year…
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