Fund of the week: Go fishing for minnows

Size isn’t everything, but this fund boasts the distinction of being the biggest trust in the smaller companies sector.

What’s more, last year it delivered the best net asset value (NAV) performance of any such trust over 12 months, says Leonora Walters in the Investors Chronicle, and “one of the best over three years”.

In all, the trust has returned 59.5% over one year and 85.5% over three, beating its benchmark Numis Smaller Companies Index.

Walters thinks the trust “will continue to do well”. The stocks it holds may yield less than bigger companies, but many have progressive dividend policies (in other words, they aim to keep growing them), are solid payers and – crucially – the dividends are also well covered.

Aberforth Smaller Companies Trust (LSE: ASL)

Aberforth UK Smaller Companies share price chart

The trust was launched in 1990 and invests in up to 80 stocks at a time. Its six managers, including Alistair Whyte and Richard Newbery, look for shares trading below what they see as their “intrinsic value”, and meet regularly with company management.

Over a third of the trust is in industrial stocks, with 21% in consumer services and 17% in financials, but last year’s outperformance was helped by bounces in retailer JD Sports and holiday operator Thomas Cook, notes Walters.

Tuite Dalton, analyst at broker Oriel Securities, says the trust’s size makes it “an ideal core holding” for those seeking exposure to UK small caps. He believes it will continue to outperform “in 2014 and beyond”.

The trust’s on-going fee is 0.81% and it is currently trading at a 9.91% discount to its net asset value.

The fund’s top holdings
Name of holding % of assets
JD Sports Fashion 3.60%
QinetiQ Group 3.00%
RPC Group 2.70%
Northgate 2.60%
St Modwen Properties 2.60%

 

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