The Global Smaller Companies Trust sees solid return, although still lags benchmark

The Global Smaller Companies Trust (GSCT) announced its annual results for the year ended 30 April 2023. The company delivered a NAV total return of 9.0% (2023: -2.9%) versus 11.3% for the benchmark (2023: -2.1%). The share price total return was 12.7% (2023: -6.2%). The company also announced a 22.2% increase in its dividend, the 54th consecutive annual increase. 

Commenting on the backdrop for the year chairman Anja Balfour noted:

“It was pleasing to see equity markets bounce back during the financial year under review. Foremost in investors’ minds was the outlook for inflation and interest rates. While inflation fell significantly in most parts of the world, tight labour markets meant that it remained higher than central bank targets and as a consequence authorities delayed cutting interest rates. As the year progressed it became increasingly evident that within developed economies consumers were operating at two different speeds: spending by higher income earners was supported by rising asset prices and interest income whilst consumption by the lower income cohort was hampered by higher costs of living that were not sufficiently covered by wage increases. Despite this mixed consumer environment, the global economy continued to grow and performed significantly better than had been feared at the start of the year. Sadly, geopolitical tensions continued to rise in the year with conflict breaking out in the Middle East, exacerbating an already tense backdrop with the war in Ukraine showing no sign of ending soon and unease between China and the US growing.”

Regarding the outlook, he continued:

“In the near term investors are likely to continue to pay particular attention to the direction of inflation and labour markets in major economies as well as geopolitical developments more widely. Our Manager will continue to focus on identifying companies that will do well regardless of what happens in the wider economy. The fund management team are still finding such opportunities within our very extensive investment universe and the Board has confidence in the Manager’s lengthy experience in investing in this asset class.

“Despite the recent underperformance of smaller companies relative to larger companies, it remains an attractive asset class over the long term. Smaller companies have the potential to deliver faster earnings growth as well as valuation expansion as they are more widely recognised. Furthermore, it is an area where active management can genuinely add value. The Manager has constructed a portfolio of investments in high quality businesses that are attractively valued and we look forward with optimism.”

GSCT : The Global Smaller Companies Trust sees solid return, although still lags benchmark