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Standard Life UK Smaller Companies – outperformance, merger and lower fees

Standard Life UK Smaller Companies - outperformance, merger and lower fees 1

Standard Life UK Smaller Companies – outperformance, merger and lower fees – the NAV of Standard Life UK Smaller Companies (SLS) delivers a total return of 24.8%, compared with the total return of 8.5% of it’s reference index, the Numis Smaller Companies plus AIM (excluding Investment Companies) Index.

Outperformance

The company’s performance was good throughout the year in question with a particularly strong post-Christmas period.  The manager, Harry Nimmo reported that outperformance was driven by market focus on trading results by individual companies.

Positive contributions came from overweight positions in high quality software, healthcare, food & drink, support services and electronics companies. Lower weightings in financials and property stocks were positive, as was the zero weighting in oil & gas and mining.

Negative contributions came from an underweight position in industrials was negative prior to Christmas and positive thereafter. An overweight position in retailers was negative from a sector point of view, however stock selection was strong with good performances from JD Sports, Joules and Motorpoint.

Three out of the five best performers were the same as last year:- Fevertree Drinks, NMC Healthcare and First Derivatives.

The five leading performers in the period were Fevertree Drinks, NMC Group, Midwich. First Derivatives and Dechra Pharmaceuticals.

Detractors at the stock level include Alfa Financial Software, Luceco, CVS Group, Medica Group and Moneysupermarket.

Proposed Merger with Dunedin Smaller Companies Investment Trust

We reported in June that as a result of the merger of Aberdeen Asset Management with Standard Life, Standard Life UK Smaller Companies is being managed alongside Dunedin Smaller Companies Investment Trust (DNDL), a company with a very similar UK smaller companies mandate. Click here to read more. Following reviews by both boards, it has been proposed that the two companies be merged. This will be achieved by way of a scheme of reconstruction under section 110 of the Insolvency Act 1986, resulting in the voluntary liquidation of Dunedin Smaller and a roll-over of its assets into Standard Life UK Smaller Companies.

The merger with Dunedin Smaller is expected to increase the assets of the Standard Life UK Smaller Companies to over £550m. A circular containing details of the proposal, will be issued to shareholders shortly and a general meeting will be held on 3 October 2018. The merger is conditional upon the support of both sets of shareholders. This will increased scale, reduce the ongoing charges ratio and increase liquidity.

Restructuring of management fee

As mentioned above, with the merger of the two trusts, the board of Standard Life UK Smaller Companies has negotiated a change in the fee structure. With effect from 1 July 2018 an additional tier to the management fee has been introduced.

In addition, the basis upon which the fee is calculated has also been changed, with a new tier added. Going forward, the fee will be calculated on Net Assets, not Total Assets:

  • up to £250m – 0.85% pa
  • £250m to £550m – 0.65% pa
  • above £550m – a new reduced fee of 0.55%

SLS: Standard Life UK Smaller Companies – outperformance, merger and lower fees

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