Aberforth Smaller Companies (ASL)

Aberforth Smaller Companies' (ASL) rigorous value approach has been a tailwind to Performance over the past five years, with the trust handsomely outperforming the benchmark, and even further outstripping the peer group average. This has led to the trust being awarded Kepler’s Growth rating for 2026. One factor contributing to the success has been the prevalence of M&A in the UK small-cap space, with strategic and trade buyers responding to the remarkable value on offer with takeovers that deliver immediate uplift. This year has seen the strongest start for M&A since 2021, with ASL benefitting on a number of occasions.

The high levels of M&A have not only supported returns but also been a key source of liquidity for the managers to rotate into the numerous attractively valued opportunities elsewhere. As such, portfolio turnover is above long-term averages, having hit the highest level for a decade in March 2026. New ideas have come from the managers exploiting the technical opportunity presented by stocks moving from the FTSE AIM Index to the main market (see Portfolio). The managers see over 70% average potential upside in their portfolio over the next couple of years through a combination of growth of profits, rerating, and dividends.

Another key demonstration of the breadth of value available is in the yield of their benchmark being above that of the FTSE All-Share Index. Prior to the present situation, the last time this occurred was briefly in 2008, and before that, it was late 2001. These periods were followed by sustained small-cap outperformance. This strong income backdrop has also helped revenue generation for the trust. It has enabled the payment of the 15th consecutive dividend increase, and fourth consecutive special dividend, which combined offer a historic yield of 3.9%.

Despite the compelling valuation opportunity, the trust continues to trade at a discount to NAV of c. 10%, compounding the value on offer in a deeply discounted UK small-cap space.