The Global Smaller Companies Trust Market Snapshot – July 2025

Smaller companies rallied in June. Markets rose in most regions. In the month, the S&P 500 index surpassed its previous record high, marking a very sharp recovery from the selloff in April. From a sector perspective, technology, telecommunications and energy led, whilst the more defensive sectors of consumer staples, utilities and healthcare lagged. This reflected increased risk appetite amongst market participants and a rotation into companies associated with artificial intelligence. Macroeconomic data was worse than expectations in most geographies, with the exception of the Eurozone. Benign inflation data, sluggish economic growth and incrementally dovish rhetoric from the Federal Reserve led to a decline in government bond yields. The month was marked by heightened geopolitical risk as Israel conducted airstrikes on Iran’s nuclear and military installations, triggering Iranian retaliation. This led to a temporary spike in the oil price. Progress was made on the passage through Congress of a US tax bill.

The Company’s net asset value (NAV) climbed 2.8% in June. The discount narrowed in the period. The movement in the Company’s NAV was behind the benchmark whilst the share price return was slightly ahead.

In North America, our portfolio underperformed the local index. Efforts by the US government to spur investment in new nuclear power plants lifted the shares of diversified industrial business Curtiss Wright. Contract logistics provider GXO Logistics’ acquisition of Wincanton received approval from the UK regulator. Furthermore, the company announced several board and management changes and raised its earnings guidance for the year. Improving demand helped the shares of semiconductor producer MaxLinear. On the negative side, after a strong recovery, profits were taken in specialty apparel retailer Boot Barn Holdings. Higher repair costs relative to used car prices dampened the outlook for auto parts distributor LKQ. A challenging volume and pricing environment led to a broker downgrading boxboard packaging company Graphic Packaging.

The UK portfolio was ahead of its benchmark. Professional services firm Knights Group made further progress with its strategy of acquiring smaller competitors and hiring revenue generating personnel that have significant client lists. Payments network PayPoint reported good results and expanded its share repurchase program. Resilient consumer spending led to a recovery in WAG Payment Solutions (a payments platform). On the negative side, data business GlobalData fell after discussions with potential acquirers ended without a deal. Online greeting card specialist Moonpig Group reported good results but announced the departure of its CEO. Adverse weather and project delays led to lower earnings forecasts for construction materials company Breedon.

The European portfolio outperformed its benchmark in the month. Information services company Karnov Group rallied along with the sector. An improving growth outlook led to a broker upgrading Kardex, a manufacturer of materials handling equipment. Earnings forecasts rose for Accelleron Industries (a producer of turbo charger technology) because of good demand and price increases. On the negative side, profits were taken in RENK Group, an Austrian manufacturer of drive systems for military vehicles. Weaker trading activity dragged down online share trading platform Avanza Bank. Sluggish consumer sentiment and a weaker dollar dampened the outlook for packaging producer SIG Group.

Returns in Japan were ahead of the MSCI Japan Small Cap index in the month. A good outlook for spending on defence lifted the shares of marine equipment manufacturer Furuno Electric. Strong customer growth led to good results from animation production company Anycolor. Heavy machinery manufacturer IHI received a broker upgrade. A weaker dollar and tariffs impeded the US business of building products company Sanwa. Higher costs led to weaker than expected earnings guidance from property developer Nomura Real Estate. Profits were taken in building materials company Maeda Kosen.

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 Small Cap Equity 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.