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%

 

Merryn

Claim 12 issues of MoneyWeek (plus much more) for just £12!

Let MoneyWeek show you how to profit, whatever the outcome of the upcoming general election.

Start your no-obligation trial today and get up to speed on:

  • The latest shifts in the economy…
  • The ongoing Brexit negotiations…
  • The new tax rules…
  • Trump’s protectionist policies…

Plus lots more.

We’ll show you what it all means for your money.

Plus, the moment you begin your trial, we’ll rush you over THREE free investment reports:

‘How to escape the most hated tax in Britain’: Inheritance tax hits many unsuspecting families. Our report tells how to pass on up to £2m of your money to your family without the taxman getting a look in.

‘How to profit from a Trump presidency’: The election of Donald Trump was a watershed moment for the US economy. This report details the sectors our analysts think will boom from Trump’s premiership, and gives specific investments you can buy to profit.

‘Best shares to watch in 2017’: Includes the transcript from our roundtable panel of investment professionals – and 12 tips they’re currently tipping. The report also analyses key assets, including property, oil and the countries whose stock markets currently offer the most value.