The Global Smaller Companies Trust Market Snapshot – August 2025

Smaller companies rallied in July. Markets rose in most regions. In the month, large caps outperformed small caps. From a sector perspective, technology, energy and utilities led whilst consumer staples, healthcare and consumer discretionary lagged. Several companies announced earnings and in general these were better than expectations. The more speculative parts of the equity markets, such as profitless companies, performed well in the month.

Macroeconomic data was better than expected in the US, Europe and Japan but underwhelmed in the UK and the emerging markets. Although light on detail, tariff agreements were reached between the US and several countries. A US tax bill passed through Congress. Despite pressure from the White House to cut, the Federal Reserve left its main policy rate unchanged. Government bond yields traded mostly in a range. After several months of declines, the US dollar strengthened in July.

The Company’s net asset value (NAV) climbed 3.0% in July. The discount narrowed in the period. The movement in the Company’s NAV and share price were behind the benchmark.

In North America, our portfolio underperformed the local index. Shares of specialty apparel retailer Boot Barn Holdings were lifted by rising earnings forecasts. Construction materials producer Eagle Materials delivered resilient earnings despite challenging weather conditions and sluggish new-home construction. Household appliance manufacturer SharkNinja benefitted from good demand for the company’s newly released products. On the negative side, insurance broker Brown and Brown saw a deceleration in organic revenue growth because of a slowdown in insurance rate increases. Barge transportation company Kirby reported lower demand from its customers in the chemicals industry because of economic uncertainty. Along with the rest of the managed-care sector, Molina Healthcare reduced its earnings guidance because of higher costs.

The UK portfolio was behind its benchmark. Oxford BioMedica, a contract development and manufacturing organisation reported strong order growth in its trading update. Video game developer Everplay announced encouraging sales growth and made progress with its IP acquisition strategy. Casino operator Rank Group delivered healthy same-store sales growth. A challenging consumer environment and increases in National Insurance contributions dampened the outlook for food and confectionary distributor Kitwave Group. Building materials specialist Marshalls suffered from weakness in its landscape-products business because of low demand and industry overcapacity. Concerns over a weakening UK consumer dragged down payments network PayPoint.

The European portfolio outperformed its benchmark in the month. Strong power-transformer demand led to robust orders and sales growth at electrical-power equipment manufacturer R&S Group. Similarly, cable manufacturer Nexans delivered earnings that were ahead of expectations and raised its forecasts for the year because of increased spending by the company’s customers on electricity infrastructure. An improving growth outlook led to good results from Kardex, a manufacturer of materials-handling equipment. On the negative side, increased caution from customers led to disappointing order growth at semiconductor equipment manufacturer ASM International. Profits were taken in ticketing and events business CTS Eventim. Weakening customer demand led to disappointing results from chemicals distributor IMCD.

Returns in Japan were ahead of the MSCI Japan Small Cap index in the month. Apparel retailer PAL Group reported solid earnings, with good margin expansion and a healthy contribution from the company’s new stores. Marine equipment manufacturer Furuno Electric benefitted from new product launches at the company’s US business. Real estate services business Tosei raised its earnings guidance because of strength in the company’s fund and consulting segment. Lower demand from the US commercial sector impeded building products company Sanwa. Lower software license sales led to disappointing results from IT services provider WingArc1st. Technology hardware specialist Amano failed to replace one-off demand in the prior year in the company’s parking systems business and the shares fell as a result.

In totality, the rest-of-world fund holdings underperformed the MSCI Asia ex Japan small cap index during the month. The Pinebridge Asia ex Japan Smaller Companies fund was ahead of the benchmark. On the other hand, the Scottish Oriental Smaller Companies and Utilico Emerging Markets investment trusts as well as the Schroders Global Emerging Markets Smaller Companies fund lagged the local index.

As at 31 July 2025