Smallcap trust Smithson struggles to find hidden gems as net asset value drops by nearly two per cent
Smallcap-focused Smithson Investment Trust struggled to find the diamonds in the rough as its net asset value dropped 1.8 per cent over the last six months.
“Our performance so far this year has been like watching paint dry,” complained manager Simon Barnard, as “large and glamorous” stocks like Nvidia have “sucked the air of of entire asset classes”.
The £2.1bn trust, which invests in small companies globally, reported in its interim results to 30 June that it had failed to match the growth of the MSCI World SMID Index, which grew 3.4 per cent in the same period.
Smallcaps, which are typically companies worth less than £350m in the UK or $1bn in the US, have not been keeping up with the large tech stocks that have dominated the market.
However, while the broader smaller companies market may be suffering, Smithson is doing particularly badly. The trust has failed to return even one per cent in the last year, compared to a trust sector average of 8.2 per cent.
Similarly, Smithson is up less than 12 per cent over the last five years, while smallcap trusts have returned an average of 25 per cent, according to data from the Association of Investment Companies.
Since the start of 2022, the trust has fallen 29 per cent and currently trades 11.7 per cent below the value of its underlying assets, despite board efforts to close that gap through an ambitious share buyback programme.
The trust added five new companies into the portfolio, funded by selling out of Australian franchisor Domino’s Pizza Enterprises, laser manufacturer IPG Photonics, and banking software company Temenos.
The new positions included US hotel franchisor Choice Hotels, best known for Quality Inn and Radisson, after the company saw shares flounder as a hostile takeover attempt continued against it, but was ultimately abandoned in March.
Other new positions included sensor designer Malaxis, Italian IT consultant Reply, and manufacturers Inficon and HMS Networks.