The Global Smaller Companies Trust
This trust invests in smaller companies from around the world. Fund manager Nish Patel believes that these businesses experience superior growth over the long term compared with larger companies. His goal is to go where other equity researchers won’t, in order to find hidden gems at attractive prices. The firm’s small-cap specialists have a well-disciplined investment process and the trust has a strong track record of beating the market. Having recently celebrated its 135th anniversary, the trust is one of the oldest in the market – it has also successfully produced 54 years’ worth of dividend growth for investors.
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Nish Patel, Lead Manager Nish Patel is a Director and Portfolio Manager in Columbia Threadneedle’s Global Small Cap Equity team. He joined the firm in 2021 following its acquisition of BMO GAM (EMEA), where he had worked since 2007. Before that, Nish was with Deloitte in the Technology, Media, and Telecommunications Audit division. He holds a BSc in Economics from University College London and is a fully qualified chartered accountant and CFA charterholder.
Nish Patel, Lead Manager Nish Patel is a Director and Portfolio Manager in Columbia Threadneedle’s Global Small Cap Equity team. He joined the firm in 2021 following its acquisition of BMO GAM (EMEA), where he had worked since 2007. Before that, Nish was with Deloitte in the Technology, Media, and Telecommunications Audit division. He holds a BSc in Economics from University College London and is a fully qualified chartered accountant and CFA charterholder.
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Talking Factsheet
Investment process
With Nish as the lead, this trust has a team of smaller company investment managers who invest directly in businesses in the UK, North America and Europe. The team has traditionally invested in other small-cap funds to gain exposure to Asian, Japanese and higher-risk emerging market companies. However, following the acquisition of BMO by Columbia Threadneedle (CTI) in 2021 (which saw the trust come under the management of the latter), the team have begun to insource some of the Japanese exposure given the wider capabilities available to them through CTI.
Nish and his team believe that picking the right stocks is far more important than being invested in the right sectors of the economy or in the right countries. They look for companies with strong franchises and good quality, motivated management teams, where share prices do not look expensive. Ideas come from many different sources and each team member will contribute, although ultimately the decision to buy or sell rests with Nish.
Risk
The manager invests in small companies, which tend to be higher risk than larger companies. As with most trusts, this one borrows money to invest (i.e. uses gearing), which also increases risk levels for shareholders. However, the manager’s deep and disciplined research process, along with a long list of stocks (around 180 to 220), does offer diversification and mitigates the smaller companies risk somewhat. Because the trust invests globally, investors should also be aware that fluctuations in currencies may impact performance.
ESG
ESG - Integrated
The Responsible Investment team is one of the largest in the industry. The team works closely with the global small-cap desk to ensure that those performing the work on individual investment opportunities for the trust are well informed in what to look for in relation to the ESG aspects of their analysis. Internal research is cross-referenced against external sources, for example MSCI ESG research, though smaller companies are often not covered in depth by external ESG ratings services.
In relation to sustainability, the fund management team will note if individual investments are aligned explicitly with any of the UN Sustainable Development Goals. Climate change is also an integral part of the process, with the team disclosing the portfolio weighted carbon-intensity of their potential investments. The trust is also active on engagement with companies.
Gearing
The board believes that structural gearing can enhance returns to shareholders over the long term. That said, they closely monitor gearing levels to ensure they remain within the parameters set out in the investment policy, which currently allows for a maximum gearing of 20% of shareholders’ funds. Gearing levels are typically much lower at around 4-5% (currently 4% at 1 January 2025). The trust has held no gearing at certain points.
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