Scottish Oriental Smaller Companies (SST)

Scottish Oriental Smaller Companies (LON:SST) aims to build a concentrated portfolio of smaller, high-quality Asian companies with the goal of capturing the region’s compelling growth opportunities. Historically, the trust has performed well following global economic crises and this has been borne out in strong relative performance through 2021 and 2022.

Recently, the portfolio has benefitted from a tilt towards the domestic demand story in Asia, while demand falters in developed markets (see Portfolio). The managers believe that this has contributed to the trust’s recent resilience and should lead to strong earnings’ growth prospects, which should bolster performance in the future.

SST has employed the same basic investment strategy since inception, though a number of changes have been made to revive the portfolio over recent years. Vinay Agarwal, the lead manager, has reduced the number of holdings in the portfolio, while the board has taken out long-term structural Gearing. Last year, Vinay was joined by Martin Lau who has been added formally to the trust as co-manager, though he has contributed input for many years.

These changes have coincided with a strong period of performance for the trust, as the management team’s quality style and valuation sensitivity has been rewarded against a difficult market backdrop. The trust’s NAV has outperformed markets considerably this year (see Performance) but the share price has failed to keep up, putting the trust on a wide Discount compared to its own history.