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Strategic Equity Capital pins its hopes on strategy shift

Strategic Equity Capital pins its hopes on strategy shift – Strategic Equity Capital reports, on a total return basis, an 18.1% increase in its NAV and 19.3% increase in its share price over the second half of 2020. These numbers lag the 28.5% return posted by the FTSE Small Cap Index, the manager attributes this to holding about 10% in cash and having relatively low exposure to cyclical stocks (which soared after the good news on vaccines in  November). As usual, there is no interim dividend.

Longer term, the trust’s returns are more encouraging – a 4.7% return in NAV terms over three years ended 31 December 2020 against 3.1% for the benchmark.

Increased focus on smaller companies

Changes were made to the management team in September,  with Ken Wotton (managing director, public equity at Gresham House Asset Management) appointed as lead manager alongside incumbent fund manager, Adam Khanbhai. The average size of companies in the portfolio is being reduced, so that the trust can exert greater influence over the companies that it invests in. It is hoped that, in time, this will translate into stronger outperformance (Ken’s open-ended fund is the only fund in the IA UK Smaller Companies Sector to have delivered positive, absolute returns in each year since its launch in 2009. It is ranked 4th over 10 years out of a universe of 52).

The board recognises that the discount is too wide but believes it will narrow once performance improves.

We should soon see a circular from the company in respect of the requisition that it received last month. There will be two resolutions. The first, an ordinary resolution, to determine whether the company should continue or not; and secondly, a special resolution requesting that in the event that the first resolution fails, the board would offer shareholders the opportunity to receive cash for their shareholding or shares in another investment trust. The first resolution requires 50% of votes to pass and the second 75%.

SEC : Strategic Equity Capital pins its hopes on strategy shift

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