BRSC has outperformed its benchmark and raised its dividend for 15 consecutive years.
BlackRock Smaller Companies Trust (BRSC) targets long-term capital growth through investment in smaller UK-quoted firms, with up to 50 per cent in Aim-quoted holdings. Its report and accounts for the year to 28 February 2018 show shareholders’ funds of £721 million.
Mike Prentis has been manager since August 2002. Roland Arnold was appointed co-manager in April 2018, having worked with Prentis since 2005. The team employs a combination of top-down and bottom-up analysis. It focuses on well-capitalised companies with strong management teams that are good cash generators, and firms where they see scope for significant share price gains.
Holdings are typically initiated with a stake of 0.25-0.5 per cent of the trust’s assets and increase to up to 2 per cent as the manager gains insight and confidence. As a result, the portfolio regularly includes more than 150 holdings.
At the end of February, more than half of BRSC’s portfolio revenues originated overseas. Its UK exposure was to more defensive businesses or those benefiting from positive structural or cyclical trends. It was substantially overweight in industrials, with an emphasis on international companies, and underweight on firms exposed to discretionary consumer spending, such as food producers, and travel and leisure firms.
Gearing averaged 9.3 per cent during the year, contributing positively to relative performance. Ongoing charges totalled 1 per cent, which included 0.3 per cent from a performance fee, since abolished. There is no explicit discount control target.
Last year’s net asset value (NAV) total return of 20.8 per cent was well ahead of the 8.3 per cent return on BRSC’s benchmark, the Numis Smaller Companies plus AIM (ex ICs) index. Total dividends were up 23.8 per cent at 26p and share price total returns were 27.3 per cent.
BRSC has outperformed its benchmark and raised its dividend for 15 consecutive years, during which the NAV per share has grown more than 13-fold, whereas the benchmark has risen less than fivefold.