Montanaro UK Smaller Companies (MTU)

Manager Charles Montanaro is in his second period of managing Montanaro UK Smaller Companies (LON:MTU) and focusses on UK smaller companies using a quality growth approach. He has access to an in-house specialist analyst team to help him identify under researched opportunities, which are often companies that are industry leaders offering long-term structural growth, and then holding them for the long term. Whilst Charles focusses on achieving capital growth when selecting stocks, the board has a Dividend policy of paying 1% of NAV every quarter to increase the attractiveness of the trust.

Charles also has a strong ESG ethos, which is built into both the trust and the wider firm. For MTU, this means that certain sectors, such as energy, are excluded. Additionally, Charles takes a straightforward approach of only buying companies with understandable business models. This means that over-complex industries, such as financials which are difficult to forecast, are often overlooked. Conversely, Charles looks for quality factors from companies with the ability to grow which is likely to lead to pronounced overweight and underweight positions, and a tilt towards the growth style of investing (see Portfolio).

This has had an impact on recent Performance and higher interest rates have been a headwind for growth stocks. However, Charles believes the low interest-rate environment will return to the UK due to structural issues, and then his stock-selection approach should be able to deliver outperformance of the index.