F&C Global Smaller Companies outperformance aided by sterling weakness

F&C Global Smaller Companies, chaired by Anthony Townsend (pictured), has announced its annual results for the year ended 30 April 2016. During the period, the trust provided an NAV total return of 3.5% beating its benchmark (a 70%/30% blend of the MSCI All Country World ex UK Small Cap Index and Numis UK Smaller Companies Index), which returned 1.3%. The share price total return was 3.2%, also outperforming the benchmark. The total dividend for the year is 10.7p. This is an increase of 10.9% over the previous year and the 46th consecutive annual increase provided by the trust. The shares finished the year trading at a small premium to NAV of 0.7%.

In terms of performance attribution, the trust says weakness in the pound during the last few months was beneficial to its results. Moreover, it says that currency moves had a larger than usual impact on its performance during the year. However, looking at individual markets, the trust’s UK and US stocks provided marked outperformance of their local currency indices whilst Continental Europe and Japan underperformed – the latter markedly so. The trust say that returns in the Rest of World segment, including the fund holdings targeting the Pacific ex Japan and Latin American markets, were again disappointing compared to elsewhere, as sentiment to emerging markets as a whole remained fragile.

In terms of portfolio activity, the trust says that its year end geographic exposure did not change much from the previous year. However, in the first half of the year, the trust says that the UK weighting rose to over 30% reflecting a good flow of new investment opportunities being identified, but it drifted lower near the end of the period as the Manager took action to reflect the risk of sterling weakness ahead of the EU referendum. The portfolio was moved to overweight compared to the Benchmark in North America during the second half of the year, as the managers took the view that the market could be something of a safe haven given the possibility of higher US interest rates coming through. In contrast, the managers took some money out of the trust’s Japanese fund holdings and moved slightly underweight on the basis that the relative outperformance of the market had gone far enough. Exposure to the Rest of World (predominantly Asian markets) dropped, but according to the trust this was mainly as a consequence of the weak market performance. The trust says that the asset allocation positioning during the year added some value against the Benchmark, with the decisions to be underweight to the Rest of the World and overweight in Europe being the right calls.

The trust announced changes to its management fee arrangements that re designed to reduce the complexity of its fee arrangements. With effect from 1 May 2016, the trust will no longer pay a performance fee and the base fees on individual holdings and collectives are to be increased to 0.55% and 0.275% respectively.

F&C Global Smaller Companies outperformance aided by sterling weakness : FCS

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