The Global Smaller Companies Trust

Investment trust

This trust invests in smaller companies from around the world. Fund manager Peter Ewins 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 130th anniversary, the trust is one of the oldest in the market – it has also successfully produced 50 years’ worth of dividend growth for investors.

Previously BMO Global Smaller Companies

Our opinion

Smaller companies have traditionally outperformed their larger counterparts over the longer term and the The Global Smaller Companies Trust offers investors the opportunity to participate in this potential growth. Peter and his team have a repeatable process, which has proved consistent over many years. We think this trust could be an excellent option for investors seeking exposure to smaller companies, who are aware of the additional risks in this part of the market.

Trust manager

Peter Ewins

My colleagues would say I am a born pessimist and that sometimes helps when considering the risks in small-cap investing, but the real joy of the job is the scope to unearth some of the next generation of winning business franchises.

Peter EwinsTrust manager

Investment board

The board is comprised of five members and is headed Anja Balfour. Anja was appointed to the board in June 2015 and is also chairman of the Schroder Japan Growth Fund PLC and a non-executive director of the AVI Global Trust PLC. She also sits on the board of mutual Scottish Friendly Assurance. Nick Bannerman, Josephine Dixon, Christopher Oldroyd, David Stileman also sit on the board.

Investment process

With Peter 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 invests in other small-cap funds to gain exposure to Asian, Japanese and higher-risk emerging market companies. Peter 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 Peter.

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 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.

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 200), 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.

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%. The trust has held no gearing at certain points.

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