North Atlantic Smaller Companies demonstrates that, while it is responsible and right for a fund's manager to have a sizeable holding in it, this is not always a guarantee of outperformance.
While manager Christopher Mills has more than £31m invested in North Atlantic Smaller Companies, more than any other manager in their investment trust, according to a recent survey by broker Collins Stewart, the trust's performance has struggled over the past year, failing to beat its benchmark the S&P 500.
However, over longer periods, the trust has done better making more than double its benchmark over five years, and nearly as much since it was launched. However, when compared to smaller companies benchmarks such as MSCI World Small Companies, it underperforms over three and five years both in terms of share price and net asset value (NAV) total return.
A small caps benchmark is presumably a fairer comparison as the trust states that the "objective of the company is to provide capital appreciation through investment in a portfolio of smaller companies principally based in countries bordering the North Atlantic Ocean".
The trust is mostly invested in UK-listed companies, though nearly a fifth of these are investment funds, so its actual geographic exposure is wider. Investors in the trust take on some risk of US dollar exposure, as nearly 30 per cent of assets are listed in the US.
The trust can be picked up at a wide discount to NAV, in excess of 32 per cent, so if performance improves investors could benefit from a tightening. However, the trust has an incredibly high total expense ratio of 2.23 per cent and levies a performance fee, which would eat a good chunk out of any gains.
NORTH ATLANTIC SMALLER COMPANIES (GB0006439003) | |||
PRICE | 963p | GEARING | 102% |
AIC SECTOR | North American Smaller Companies | NAV | 1,382p |
FUND TYPE | Investment trust | PRICE DISCOUNT TO NAV | 32.69% |
MARKET CAP | £138.6m | 1-YEAR PRICE PERFORMANCE | -13.39% |
SET-UP DATE | 24/01/1973 | 3-YEAR PRICE PERFORMANCE | 48.31% |
TOTAL EXPENSE RATIO | 2.23% | 5-YEAR PRICEPERFORMANCE | -16.39% |
YIELD | 0% | MORE DETAILS | https://www.johcm.co.uk/microsite/nav/site/fund-range/cef-range/28/overview/ |
Source: Morningstar.
Performance data as at 13 January 2012.
TOP 10 HOLDINGS as at 31 October 2011
Bionostics Holdings | 10.2 |
Oryx International Growth Fund | 9.6 |
RPC Group | 7.7 |
Hampton Investment Properties | 6.9 |
Guinness Peat Group | 6 |
Trident Private Equity Fund III | 5.9 |
MJ Gleeson Group | 5.5 |
BBA Aviation Group | 5.1 |
Celsis | 4.4 |
Nationwide Accident Repair Services | 4.2 |
Sector Breakdown
Investment Companies | 18.8 |
Manufacturing | 10.7 |
General Industrials | 9.2 |
Real Estate | 9.1 |
Health Care, Equipment & Services | 8.6 |
Household Goods | 5.5 |
Pharmaceuticals & Biotechnology | 0.7 |
Support Services | 8.2 |
Industrial Transportation | 5.1 |
General Financials | 10.9 |
Software & Computer Services | 4.1 |
Industrial Engineering | 0.3 |
General Retailers | 3.3 |
Technology Hardware & Equipment | 2.4 |
Travel & Leisure | 0.7 |
Alternative Energy | 1.8 |
Oil & Gas Producers | 0.6 |