Investment trust insider on US small caps – James Carthew: US small caps will have their magnificent rally
We know that UK-focused smaller company trusts have been suffering recently and one of the reasons cited is that UK-based investors are reducing their allocation to the domestic stock market within their portfolios.
The destination for their money is often thought to be the US, which dominates global indices, but this interest is not showing up in the ratings of the two small-cap investment companies focused on the US – Brown Advisory US Smaller Companies (BASC), which trades on a 12% discount, and JPMorgan US Smaller Companies (JUSC), priced at 10% below net asset value (NAV).
In part, this is because – as in the UK – small-cap stocks have lagged larger companies by quite a wide margin. In sterling terms, over 10 years to the end of March 2024, the Russell 2000 Smaller Companies index has produced 163%, about half the 322% return on the S&P 500 index.
It probably also does not help that both funds have underperformed the Russell index. Over the year to 31 March 2024, BASC returned 10.5% in NAV terms and 13.4% in share price terms. For JUSC the equivalent figures were 9.5% and 3.7%, while the Russell 2000 returned about 17%… read more here