Despite the recent stock market dominance of mega-cap US tech companies, high-quality smaller caps have a longer term record of outperforming. With greater inherent growth potential than their large cap brethren, small caps tend to fare well in a falling interest rate environment and with borrowing costs on the way down in the UK, US and elsewhere, the stage looks set for a smaller companies revival.
As such, Shares believes this is an opportune moment to put money to work with The Global Smaller Companies Trust (GSCT). A near-9% discount to NAV (net asset value), narrowed from 17.7% in July 2023, demonstrates there is still value on offer at this well-diversified trust, which offers portfolio builders a simple way to access the growth potential of exciting growth companies around the globe for a reasonable ongoing charge of 0.78%. As rates edge down and sentiment towards small and mid caps improves, the £794.4 million cap should build on its robust long-term track record which shows a 10-year share price return of 114%.
Columbia Threadneedle Investment’s Nish Patel is the lead manager following the recent retirement of Peter Ewins and the trust benefits from a strong dedicated small company investment team who focus on high-quality, well-managed, soundly financed and profitable companies.
Global Smaller Companies Trust’s portfolio is a good one-stop shop for investors seeking exposure to the dynamic growth of UK and overseas small and mid cap stocks, but in an ultra-diversified way that dampens down volatility.
Reassuringly balanced in terms of its weighting in growth versus value stocks, the fund provides exposure to a broad spread of geographies. As of 31 July, 42.3% of its assets were in North America, 23.9% in the UK and 11.2% in Continental Europe, with 13.2% and 9.6% in the Rest of World and Japan respectively.
Company exposure is provided through more than 200 directly-held companies plus five collective fund investments, which means company-specific risk is negligible. The trust’s top 10 stock positions include building materials producer Eagle Materials (EXP:NYSE), tank barge operator Kirby (KEX:NYSE) and actuators-to-aircraft controls maker Curtiss Wright (CW:NYSE), while the five funds include Eastspring Investments Japan Smaller Companies, investment trust Scottish Oriental Smaller Companies (SST) as well as the Schroders Global Emerging Market Smaller Companies Fund.
Global Smaller Companies Trust is one of the Association of Investment Companies’ ‘dividend heroes’, its 22.2% hike in the divided to 2.81p for the year to April 2024 taking its unbroken payout growth record to 54 years, although strong share price performance over the period means the yield is relatively skinny at 1.7%.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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