Jason Butler of NW Brown: Trust offers a way in to under-researched corner of UK market
PUBLISHED: 16:09 02 October 2018 | UPDATED: 16:33 02 October 2018
Business columnist Jason Butler of NW Brown on the latest market developments.
Standard Life UK Smaller Companies is a £380m investment trust that aims to achieve long-term capital growth by investment through quoted UK smaller companies.
The trust was launched in 1993 and the current manager, Harry Nimmo, took over in 2003.
Nimmo started working for Standard Life Investments in 1985 and is currently entrusted with almost £2bn of assets under management in the UK smaller companies sphere.
The trust comprises approximately 60 holdings representing Nimmo’s highest-conviction investment ideas.
The ideas are initially found within the Numis Smaller Companies Index. However, in contrast to many peers, he will hold on to companies which have grown larger than his reference benchmark.
This philosophy is only true of companies that still fit his criteria. The risk is managed carefully by trimming large holdings, ensuring that they stay below five percent of the total portfolio.
Nimmo focuses on the fundamentals of companies and has a quality bias, preferring companies with long-term contracts, an element of pricing power over competitors and without excessive debt.
This investment process has worked well for the trust, which has delivered a five-year capital return of 77.6% for its share price compared with 38.9% for his reference index.
Earlier this year, the trust announced a potential merger with the Dunedin Smaller Companies Trust, which has a market cap of £137m.
The merged entity will still be managed by Nimmo and the larger assets under management will enable the trust to reduce the annual management charge and improve liquidity, benefitting all shareholders.
Overall, the trust offers exposure to an under-researched area of the UK market via an experienced manager with a proven track record and process.
• Jason Butler of NW Brown is a columnist for EDP Business.