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Aberforth overcomes market’s growth bias

Aberforth overcomes market’s growth bias – Aberforth Smaller Companies beat its benchmark over the year ended 31 December 2019, returning 26.9% against 25.2% for the Numis Smaller Companies Index (excluding investment companies). A dramatic narrowing of the discount translated into a 39.8% return for shareholders. The underlying dividend is up 5.8% to 32p and there is also a special dividend of 4p.

There is a continuation vote at this year’s AGM. The directors point out that the trust has outperformed over the past three years and urge shareholders to vote in favour of continuation.

The trust’s outperformance is remarkable given how out of favour the managers’ value style of investing has been. the report highlights a table from London Business School that uses data from the Numis Index. That shows the style headwind faced by the trust.

Value has beaten growth by 1.5% a year on average since the launch of the fund in 1990 and by 3.2% a year on average since the launch of the Numis Smaller Companies Index 64 years ago. However it has not worked since the financial crisis. [QuotedData’s James Carthew wrote an article on this topic for Citywire recently.]

Aberforth has ended up being exposed to the smaller end of the small cap (which has also underperformed) and companies focused on the UK domestic economy (which have been suffering since the Brexit referendum).

The trust beat the index through good stock selection, therefore. However, frustratingly, Aberforth does not give us any information on this – no holdings are mentioned in the results announcement. We’ve never understood this.

ASL : Aberforth overcomes market’s growth bias

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