Charles Montanaro has committed to five more years as fund manager on the Montanaro UK Smaller Companies Investment Trust and announced that his eponymous fund house has been hiring during the coronavirus outbreak.
The £238m investment trust revealed in its annual financial results on Tuesday morning that its net asset value had fallen 8.5% over the financial year ended 31 March compared to its benchmark which was down 25.9%.
Its discount also narrowed over the period from 18% to 11%, which was attributed to a “major” effort from Montanaro (pictured) to encourage retail flows into the trust. “This does appear to be bearing fruit with platforms making up an ever increasing percentage of the share register,” the report said.
By the end of 2019, Montanaro UK Smaller Companies had returned 23% in NAV terms and 43% in share price terms since the start of its financial year on 1 April 2019, highlighting how much the coronavirus outbreak wiped out full-year returns.
Net gearing remained below 10% for most of 2019 before being raised to 12% ahead of the UK general election. It was subsequently reduced and now stands at 4.2%.
“Montanaro has always retained high levels of cash precisely for times like these,” said Montanaro. “In past bear markets we have grown the team. This is no exception as we recruited a healthcare analyst to join our team as well as two additions to our back office team.”
The report also revealed Montanaro had committed to at least a further five years on the trust.
Montanaro UK Smaller Companies’ largest holdings at the end of March were packing business Hilton Food Group, Transact owner Integrafin and landscaping business Marshall’s, which have weightings ranging from 3.7% to 4.6%. Its weighting in AJ Bell has increased over the period from 0.5% to 2.4%.
Covid-19 would threaten businesses with structural weaknesses, such as poor management, a weak balance sheet, a lack of recurring revenue or pricing power, Montanaro said.
“Opportunities are already emerging from the darkness of the pandemic – some of our companies are seeing their competitors fail while others have been able to raise capital on attractive terms to fund future growth. As always, the strong will emerge stronger from the ashes of the world economy.”
