UK allocation weighs on CT’s Global Smaller Companies trust

The Columbia Threadneedle trust underperformed its benchmark in the year to 30 April

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Columbia Threadneedle’s Global Smaller Company Trust saw net asset value (NAV) and share price lag its benchmark in the year to 30 April 2023 as its UK small-cap holdings dragged on overall performance.

The trust’s NAV total return was -2.9% for the year, underperforming the -2.1% posted by the benchmark.

A breakdown of geographical performance within the portfolio showed that its UK holdings contributed -6.3% to total returns, underperforming the regional benchmark by more than three percentage points. Chair Anja Balfour called stock selection “challenging”.

The portfolio also underperformed in Europe and the US, the latter being the region in which the largest proportion of assets are invested. Its US allocation contributed -4.2% to the portfolio. Only its Japan allocation performed positively, with a considerable 9.1% return.

NAV per share fell to 166p during the 12 months, but the pace of its decline was outstripped by that of its share price, which dropped 7.4%. This left the Columbia Threadneedle trust trading at a discount of 12.7% by 30 April, far wider than its sub-5% target.  

Since the end of April, the discount has widened further, to 14%.

Despite its difficulties during the year, the trust grew its dividend by 25%, marking 53 years of annual dividend growth. This has ensured its continued membership of the AIC Dividend Hero club.

Looking ahead, Balfour said it was likely that the path of inflation and interest rates in the next few months would have a large bearing on equity market trends.

“The lagged impact of previous rate hikes will be a headwind in the coming period for the global economy. Having said this, the manager (Peter Ewins) is continuing to find opportunities in the markets, helped by the pullback in valuations and by the increased depth of investment research capabilities within the enlarged Columbia Threadneedle Investments business,” Balfour said.


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