Investment trusts

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to achieve long-term capital growth for shareholders through investment mainly in smaller UK quoted companies.

Why choose it?

We aim to find the ‘hidden gems’ within the small cap universe, investing in high-quality growth companies that are able to shape their own futures regardless of the wider economic environment. As active managers, we believe this area presents us with an attractive hunting ground: these companies are often under-researched, and pricing is inefficient. This gives us great opportunities to generate returns for our clients over the long term.

Suited to…

Investors looking for carefully selected opportunities among the UK’s vibrant small cap sector for long-term capital growth. Investors need to be able to tolerate variation in their capital.

Morningstar Rating: Since January 2012.
Awards/Ratings have not been superseded to date.

The Morningstar Analyst Rating is subjective in nature and reflects Morningstar’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, Morningstar does not guarantee that a fund will perform in line with its Morningstar Analyst Rating. Likewise, the Morningstar Analyst Rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision.

Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
• Smaller company investments are often associated with greater investment risk than those of larger company shares.

Sign up for Regulatory News Service alerts

To receive email alert notifications once an update to the Trust occurs, please sign up and select the updates you would like to receive via The Association of Investment Companies website here. Please be aware by clicking on this link you are leaving BlackRock and entering a third party’s website. As such, BlackRock is not liable for its content.

This page is being updated and will be available shortly.

Fund manager commentary

30 April 2024

Comments from the Portfolio Manager

Please note that the commentary below includes historic information on the Company’s NAV performance and index performance. 

The figures shown relate to past performance. Past performance is not a reliable indicator of future results.

During April the Company’s NAV per share retuned 2.5% to 1,580.73p on a total return basis, outperforming our benchmark index which returned 1.9%. For comparison the large cap FTSE 100 Index outperformed small and mid-caps, returning 2.7%.¹

UK markets showed resilience as signs of easing inflation, expectations of early interest rate cuts by the Bank of England and attractive prices have helped boost investor interest in UK equities. Blue chip companies in particularly had strong gains. The FTSE 100 Index rose steadily over the month, before reaching a record high of 8,147 points, thanks to a substantial exposure to mining and energy sectors which benefitted from the strength in oil, copper, and precious metals. The healthcare and consumer staples sectors, which are significant dollar earners, also contributed to the UK market's relative performance, aided by sterling's weakness against the US currency. Although not quite to the same extent, we did witness performance trickling down to UK small and mid-cap stocks, a healthy signal of market breadth.

The pace of M&A (mergers and acquisitions) activity continued through April, with the portfolio benefiting via our holding in UK self-storage provider, Lok’nStore. The company agreed to the £378mn takeover bid by the Belgian Listed rival Shurgard, a circa 30% premium to the share price on the day. This was yet another example of UK listed business trading far below the price that strategic buyers are willing to pay. TT Electronics contributed positively to performance as the share price reacted to the new CEO Peter France’s plans to improve performance and create long term value for stakeholders. Shares in XPS Pensions Group performed well after the company released its pre-close trading update, stating that full year results will be ahead of previously upgraded guidance.

YouGov was the largest detractor during the month. The company reported in-line results. However, the underlying mix has proved to be worrying, with a marked slowdown in its core data products business and a larger than expected weighting to H2 to meet their full year guidance. Having recently acquired the Consumer Panel Services business from Gfk, YouGov has moved from net cash to net debt, and with the slowdown in its core business, we have moderated the holding slightly. Gamma Communications was another detractor as the share price drifted downward during the month on no fundamental news. Auction Technology Group (ATG) also detracted from performance after releasing financial results which showed lower than expected profit before tax causing a selloff in the shares. We continue to believe there are signs ATG is through the worst of the post COVID trading disruption, and that the shares offer considerable value once end markets normalise.

Since the end of 2021 rising interest rates have been weighing on the valuations of long-duration, higher growth shares in the stock market. As a result, UK small and mid-caps have continued to underperform large caps and we are now in the deepest and longest cycle of underperformance in recent history; worse than the Global Financial Crisis, COVID, Brexit, Tech sell-off or Black Monday. The fourth quarter of 2023 saw markets reflect the expectation of rate cuts in 2024 in response to easing inflation data. However, as we have entered 2024, the backup in bond yields has led to a volatile start to the year in equity markets.

Against this backdrop, the question remains, what are the catalysts for this trend to change? Unfortunately, there is no simple answer. While there are many headwinds to the UK SMID market; economic uncertainty, political uncertainty, the structural flow issues in the UK market, the risk of more pervasive inflation, to name a few, we remind ourselves and take comfort in the fact that many of our holdings continue to deliver against their objectives. Furthermore, inflation and mortgage rates are falling, business confidence is improving, and consumers are experiencing real wage growth for the first time in years. At some point, we are confident that investors will decide the balance of probabilities is in favour of the opportunities, that the risks are more than adequately priced in, and that an increased allocation to UK small and mid-caps is warranted.

As ever, we remain focused on the micro, industry level change and stock specific analysis and the opportunities we are seeing today in our universe are as exciting as ever. Historically, periods of heightened volatility have been followed by strong returns for the strategy and presented excellent investment opportunities.

We thank shareholders for your ongoing support.

¹Source: BlackRock as at 30 April 2024

Unless otherwise stated all data is sourced from BlackRock as at 30 April 2024. 

Any opinions, forecasts represent an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biography

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Roland Arnold is manager of BlackRock Smaller Companies Trust plc and a member of the UK Equity Team. Mr Arnold has been co-manager of the BlackRock UK Special Situations Fund since August 2012, and manager of Small & Mid Cap UK Equity Portfolios since 2006. Roland’s service with the firm dates back to 2000, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006.

Board of directors

All of the Directors are independent of the management company and are members of the Management Engagement Committee. With the exception of the Chairman all Directors are members of the Audit Committee.

Ronald Gould (Chairman) was appointed to the Board in April 2019 and became chairman of the Company in June 2019. He is currently Chairman of Henderson Far East Income Trust plc, Think Alliance Asia and was previously Chairman of Credo Capital Partners AB, Compliance Science Ltd and a Non-Executive Director of the JPMorgan Asian Investment Trust plc. He was also previously Managing Director and Head of the Promontory Financial Group in China, CEO of Chi-X Asia Pacific, Senior Adviser to the UK Financial Services Authority, CEO of investment bank ABG Sundal Collier and Vice Chairman of Barclays Bank asset management activities.

Susan Platts-Martin (Senior Independent Director) appointed on 21 April 2016, is the Chairman of Baillie Gifford China Growth Trust plc and formerly sat on the Advisory Board of the Barings Targeted Return Fund. She previously acted as Protector of Power to Change Trust. A qualified chartered accountant with 26 years' experience in financial services, she was the first head of investment trusts at Fidelity International, responsible for establishing and growing a successful investment trust business. She has experience of both open and closed ended funds having also been director of product development and head of fund accounting at Fidelity.

Mark Little (Chairman of the Audit Committee) was appointed to the Board on 1 October 2020. He is a non-executive director and also chairs the audit committees of the Majedie Investment Trust Plc and Securities Trust of Scotland Plc and is a non-executive Director and audit committee chairman designate of the Abrdn Equity Income Trust plc. He was also previously Investment Director at Seven Investment Management and a non-executive director (and audit committee chairman) of Sanditon Investment Trust plc as well as a non-executive director for the start-up business UWI Technology and the charity Winning Scotland Foundation. Mr Little has a wealth of experience in the financial services sector, and began his career as a fund manager with Scottish Widows Investment Management after qualifying as a chartered accountant with Price Waterhouse in 1991. He subsequently worked as Global Head of Automotive Research for Deutsche Bank and joined Barclays Wealth in 2005, where he became Managing Director of Barclays Wealth (Scotland and Northern Ireland).

James Barnes was appointed to the Board on 31 July 2021. He is a Non-Executive Director and is also currently the Chairman of Vestey Holdings, the Horticultural Trades Association, Thirlstane Castle Trust and the Crieff Food Company and was previously a Director and Chairman of Dunedin Smaller Companies Trust plc. Mr Barnes was also previously a Director of Dobbies Garden Centres plc; he was instrumental in growing the business and leading its sale to Tesco in 2007. Mr Barnes has a wealth of experience in the financial services and UK smaller companies sector and began his career in corporate finance and investment banking.

Helen Sinclair was appointed to the Board on 1 March 2022. She began her career in investment banking and spent nearly eight years at 3i plc focusing on management buy-outs and growth capital investments. She later co-founded Matrix Private Equity (which became Mobeus Equity Partners) in 2000 and subsequently became Managing Director of the company before moving to take on a number of non-executive director roles. She is a non-executive director of WH Ireland Group plc, Shire Income plc and Sherborne Investors (Guernsey) C Limited and Chairman of Octopus Future Generations VCT PLC. Ms Sinclair was previously Chairman and non-executive director of British Smaller Companies VCT and a non-executive director of Mobeus Income & Growth 4 VCT plc and The Income & Growth VCT plc.

Dunke Afe was appointed to the Board on 1 January 2024 as a Non-Executive Director. She is an accomplished global marketing executive with extensive experience in raising brand awareness, delivering high-impact portfolio strategies and omni-channel marketing campaigns to drive business growth. She has previously worked with top blue chip multinationals including Unilever, Kimberly Clark and Estee Lauder. Ms Afe is also a Non-Executive Director of CT UK Capital and Income Investment Trust plc.