BLACKROCK SMALLER COMPANIES TRUST PLC

Meet the Manager

Thankful for small blessings 

Roland Arnold knows his way around the universe of smaller companies better than most and – despite its challenges – finds it brings many rewards

Roland Arnold

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor may not get back the amount originally invested.

Roland Arnold is something of an expert when it comes to smaller companies, having worked in the sector for almost two decades. He joined BlackRock in 2000 and currently manages a variety of portfolios for the UK Equity Team, including the BlackRock UK Smaller Companies Trust.

He explains that the majority of his time is spent analysing smaller companies and meeting their management teams – those that already form part of the portfolios and non-holdings that may be of potential interest.

As the UK small/mid-cap (SMID) market doesn’t receive the same level of analyst coverage as larger companies, time spent with management teams understanding the core drivers and where opportunities exist for their businesses is vital.

Roland says: “Any decision you make in the SMID market, where you provide capital for a company to carry out a transformative transaction, brings a degree of satisfaction. It’s definitely one of the rewarding dynamics of the role to get to know companies and be in a position to help in a small way with their development.

The team is measured in its approach, however. As Roland says: “Any team functions best when complementary skill sets and outlooks co-exist, sparking debate and discussion that allows a contrary point of view to be explored, and our investment team is no different, with a healthy balance of optimism and cynicism.”

He says that if he could go back and give himself advice it would be not to be so hard on himself when an investment doesn’t work out as he’d hoped. He explains that one of his most frustrating moments came in early 2009. “We had identified the change in market sentiment towards the end of the first quarter, but liquidity in SMID meant we weren’t able to shift the portfolio quickly enough to make the most of the recovery. That serves as a reminder that at our end of the market you need to anticipate sentiment early and it isn’t enough to have an idea or a strategy, as you also need to be able to act on it."

“All equity investing carries risk, but small-cap investing has an amplified profile; business models are less mature and share prices can be more volatile. The issue isn’t getting it wrong, although clearly we all want to minimise errors. What is important is acting decisively when the facts change: to exit the position if fundamentals have deteriorated or add to it if the shares have overreacted.”

While investors see the results of Roland’s endeavours through the performance of the Company – which for 16 consecutive years has outperformed its benchmark – what they don’t see is the effort and teamwork that go on behind the scenes.

BlackRock Smaller Companies Trust versus the UK market

Cumulative Return 31 December 2004

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy

Source: BlackRock, BlackRock Smaller Companies Trust plc NAV total return net of fees. As at 30 April 2019. #BlackRock Smaller Companies Trust plc. Smaller company investments are often associated with greater investment risk than those of larger company shares. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index. 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 investments we make are the result of intense team debate. Every idea is cross-examined before entering the fund, and that debate is what makes the role of fund management interesting,” he says.

Risk warnings

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Trust Specific Risks

Liquidity risk: 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.

Gearing risk: 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 companies risk: Smaller company investments are often associated with greater investment risk than those of larger company shares.

Important Information:

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: +44 (0)20 7743 3000. Registered in England and Wales No. 2020394. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at www.blackrock.co.uk/its. We recommend you seek independent professional advice prior to investing.

The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

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 BlackRock Smaller Companies Trust plc currently conducts its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

Any research in this material has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This material is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

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