The Global Smaller Companies Trust Market Snapshot – March 2025

In February, smaller companies fell in most geographies in sterling terms, with the exception of Europe ex-UK. Economic data deteriorated in North America and parts of the Emerging Markets. In contrast, data surpassed expectations in other geographies. The leading sectors were consumer staples, telecommunications and financials. The laggards were consumer discretionary, technology and industrials. Long standing security alliances frayed between the US and its allies, encouraging European governments to increase their spending on defence. As a theme, we saw continued profit-taking in markets and sectors that have been strong in recent years, such as the US and the technology sector in particular. On the other hand, European markets continue to recover and are now attracting investor inflows. Inflation remained above central bank targets. Bond yields, the dollar and oil fell in the month as US economic growth cooled. Gold continued its recent winning streak.

The Company’s net asset value (NAV) fell 4.6% in February. The discount narrowed in the period. The movement in the Company’s NAV was slightly behind the benchmark whilst the share price movement was ahead.

In North America, our portfolio outperformed its benchmark. Insurance broker Brown and Brown delivered strong organic revenue growth in its national programs business. Precious metals streaming company, Wheaton Precious Metals, announced long-term production guidance that was well above expectations. Car parts distributor LKQ revealed that it expects headwinds from higher insurance rates and a sluggish recreational vehicle market to abate in the second half of the year. On the negative side, western and workwear retailer Boot Barn Holdings was hit by concerns over the implementation of tariffs. Higher interest rates continue to challenge the US housing market and this slightly dampened the outlook for construction materials companies Eagle Materials and Martin Marietta Materials.

The UK portfolio was behind its benchmark in February. Law-firm consolidator Knights Group saw an acceleration in its organic revenue growth. Defence contractor Chemring reported strong growth in orders, it also reinstated a sharerepurchase program and was the subject of takeover speculation. Healthcare services provider Optima Health won a large contract to provide pre-employment medical assessments for the UK armed forces. Frustratingly, video games developer Everplay reported strong earnings but was dragged down with the wider sector because of a challenging outlook for the UK consumer. Cell and gene therapy specialist Oxford Biomedica was hurt by potential tariffs. Investor concerns grew over the prospects for the European division of payment network WAG Payment solutions.

The European portfolio was behind its benchmark during the month. Shares of the Bank of Ireland rallied as worries over the outcome of the government investigation into motor car financing receded. German ticketing and events business CTS Eventim posted strong results, with record revenues and earnings. Crane manufacturer Konecranes saw strong order growth. On the negative side, Italian industrial business Interpump reported weak demand in its hydraulics business. Swimming pool equipment manufacturer Fluidra was caught up in the wider fears over potential tariffs. Higher whey prices seem likely to impact this year’s profits at nutrition business Glanbia and the shares fell as a result.

Returns in Japan were behind the MSCI Japan Small Cap index in the month. Earnings from property developer Nomura Real Estate Holdings included strong growth in domestic apartment sales. Price increases helped software developer NSD deliver better than expected earnings. Office supplies specialist Kokuyo announced a share repurchase program and the stock responded favourably to this. On the negative side, auto parts manufacturer Niterra suffered from weak auto production in Europe and an adverse inventory adjustment. Toymaker Tomy reported weaker than expected sales in its domestic business. Shares of IT distributor Daiwabo Holdings fell along with the sector.

In totality, the Rest of World fund holdings outperformed during the month. The Utilico Emerging Markets and Scottish Oriental Smaller Companies investment trusts, and the Pinebridge Asia ex Japan Smaller Companies fund delivered good relative performance. The Schroders Global Emerging Markets Smaller Companies fund was behind the local benchmark.