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About this investment trust

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

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.

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.
Money Observer Award: As at 7 February 2020.
Moneywise Award: As at 29 March 2020.
Awards/Ratings have not been superseded to date.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.

Useful information

Fees & Charges

Annual Expenses as at Date: 28/02/2020

Ongoing Charge (including any Performance Fee): 0.7%

Management Fee Summary: BlackRock receives an annual fee which is calculated based on 0.60% in respect of the first GBP 750m of the Company's total assets less current liabilities, reducing to 0.50% thereafter. There are no performance fee arrangements in place.

  • ISIN: GB0006436108

    Sedol: 0643610

    Bloomberg: BRSC:LN

    Reuters: BRSC.L

    LSE code: BRSC

  • Name of Company: BlackRock Fund Managers Limited

    Telephone: 020 7743 3000

    Email: cosec@blackrock.com

    Website: www.blackrock.com/uk

    Correspondence Address: Investor Services

    BlackRock Investment Management (UK) Limited

    12 Throgmorton Avenue

    London

    EC2N 2DL

    Name of Registrar: Computershare PLC

    Registered Office: Exchange Place 1

    1 Semple Street

    Edinburgh EH3 8BL

    Registrar Telephone: +44 (0)370 707 1649

    Place of Registration: Scotland

    Registered Number: 006176

  • Year End: 28 February

    Results Announced: October (interim), April/May (final)

    AGM: July

    Dividends Paid: November (interim), June (final)

Fund manager commentary

30 November 2020

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 November the Company’s NAV per share rose by 11.3%1 to 1,568.18p, outperforming our benchmark index which returned 11.0%1; for comparison the FTSE 100 Index rose by 12.4%1 (all calculations on a capital only basis).

Equity markets rallied during November as positive COVID-19 vaccine results showing better than expected efficacy from three candidates (Pfizer/BioNTech, Moderna and Oxford/AstraZeneca), sparked one of the sharpest rotations away from growth and into value shares on record. The rotation saw many of the biggest losers this year making the greatest gains during November, resulting in UK and European indices outperforming other developed equity markets. After several uncertain days, markets also received a boost from the outcome of the US election, which saw Joe Biden’s Democrats win the White House but the Republicans hold the senate, arguably the most market friendly result.

Equity market moves during November were heavily driven by the rotation from growth stocks into more value orientated areas of the market, a rotation which also drove much of the Company’s NAV performance for the month. However, despite this headwind to our growth bias style, actions taken earlier in the year to diversify the portfolio, and some positive updates from companies that continue to successfully navigate this challenging year, resulted in outperformance. IG Design Group reported sales ahead of expectations as people have not held back on Christmas preparations (decorations, gift packaging and crackers), despite the unprecedented challenges of 2020. Meanwhile the company has seen strong demand for its craft kits as families have embraced many ‘at home activities’ during the year. Our holding in Central Asia metals rallied with the mining sector and strengthening copper price. The shares also benefited from the announcement that the company would resume payment of its interim dividend, which was deferred earlier this year). Shares in Pebble Group rose in response to a positive trading update, which confirmed that the group is on track to meet full year expectations for the year ending December 2020. Its Facilisgroup business has continued to perform well during the pandemic, while its Brand Addition business has continued to improve since flagging weakness in September.

Many of the largest detractors during November were simply the strongest performers of recent months giving back some of their gains as investors sold winners to buy into the value rally. This impacted our holdings in YouGov and Games Workshop. Importantly, underlying trading in both businesses remains strong and we do not see any fundamental change to the investment case for either simply because of the announcement of successful COVID-19 vaccines. Both companies remain very attractive and we are excited by the opportunities that we see ahead for these businesses, and we have used share price volatility to add to our holdings.

The ongoing COVID-19 pandemic along with the US Presidential Election and Brexit trade negotiations have been key sources of volatility in recent months, and resolution on these three issues has, and will remain key for equity markets to return to some level of rational behaviour. At the time of writing, a number of countries have begun to administer the vaccine to the most vulnerable individuals, and therefore, despite further mandated restrictions, stock markets are now focused on how quickly the world can return to something approximating normality. Whilst the news of workable vaccines is clearly positive for markets and global economies, we remain mindful that any programme of mass vaccination will take many months to implement, and therefore we may see further volatility from third/fourth waves of the virus and lockdowns.

Politics never leaves us, and whilst the US election result has provided the hope of a more balanced global political environment, attention is now shifting to Brexit. From our perspective any form of clarity is positive for UK equities over the medium to long-term. Given how under-owned the UK market is and the discount it trades at compared with other global markets, we see any conclusion as having the potential to drive flows into UK equities regardless of whether we have a negotiated deal or we leave without one. The negotiations have in one form or another been going on for years, giving companies ample time to prepare their businesses for a no deal Brexit. We therefore see the risk of unexpected business disruption as relatively muted at an individual company level. Whilst there will undoubtedly be some sectors that are more exposed than others, we remain firmly of the belief that strong companies will prevail, regardless of the result of the negotiations. We continue to believe that smaller companies in particular will be able to react and adapt fastest to whatever form Brexit takes.

The Company’s investment strategy is focussed on quality growth investments in smaller companies, a style that has demonstrably worked for the long-term, and historically periods of heightened volatility, such as this, have proven to be excellent investment opportunities.
Source: Unless otherwise stated all data is sourced from BlackRock as at 30 November 2020. 

Source: 1Datastream as at 30 November 2020

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

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.

Roland Arnold
Portfolio Manager
Roland Arnold

Board of directors

All of the Directors are independent of the management company and are members of the Audit Committee and the Management Engagement Committee.

Ronald Gould (Chairman) was appointed to the Board in April 2019 and became chairman of the Company in June 2019. He is currently a Non-Executive Director of ONE Re Ltd and Chairman of Think Alliance Asia and Compliance Science Ltd, and was previously 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.

Caroline Burton was appointed to the Board in July 2011. She is a member of the committee of management of Hermes Property Unit Trust. She was previously a non-executive director of Liverpool Victoria, LVGIG Limited and TR Property Investment Trust plc. She has almost forty years of investment experience across a wide range of asset classes and geographies acting with a variety of different types of investor. She has been involved with investment trusts for many years, as well as with insurance companies, wealth managers and pension funds.

Michael Peacock (Chairman of the Audit Committee) was appointed to the Board in July 2012. He is a non-executive director and was previously chairman of the Audit Committee of Regeneris plc. A qualified chartered accountant, he has over 19 years' experience in a number of senior roles in industry, and was the group finance director of Victrex plc until his retirement in 2010. He also spent a number of years in corporate finance, first at Hill Samuel & Co Ltd and between 1987 and 1990 at Barclays De Zoete Wedd Ltd.

Susan Platts-Martin (Senior Independent Director) appointed on 21 April 2016, is the Chairman of Witan Pacific Investment Trust PLC and sits on the Board of the 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 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. 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).

Investment strategies targeting growth and income
Investment strategies targeting growth and income
Over 25 years of proven experience running investment trusts
Over 27 years of proven experience running investment trusts. (December 2019)
Unparalleled research capabilities
Unparalleled research capabilities and experienced stock pickers
Contact
To get in touch contact us on:
Telephone: 020 7743 3000
Email: cosec@blackrock.com

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