The Global Smaller Companies Trust Market Snapshot – June 2025

Smaller companies surged in May as the US administration backtracked on some of its previous rhetoric on trade. Asia ex-Japan and the UK delivered particularly strong returns in the month. The leading sectors were technology, industrials and consumer discretionary. Healthcare, consumer staples and telecoms all performed less favourably. This reflected increased risk appetite among market participants. Policy uncertainty remained high, and concerns lingered about the sustainability of economic growth and the future direction of inflation both in the US and in other regions. Despite this, macroeconomic data was better than expectations in most geographies with the exception of Japan.

US Government bond yields rose in the month, particularly for longer-dated maturities as concerns grew about the sustainability of government budget deficits. Ratings agency Moody’s downgraded the debt of the US. The recent trend of a weakening US dollar continued in the month, despite the pick-up in government bond yields. The gold price continued its recent ascent but showed signs of fatigue.

The Trust’s net asset value (NAV) climbed 5.5% in May. The discount widened a little in the period. The movement in the Trust’s NAV was slightly ahead of the benchmark, while the share price return was marginally behind.

In North America, our portfolio slightly underperformed the local index. Despite concerns over tariffs, specialty apparel retailer Boot Barn Holdings
reported strong same-store sales growth and better than-expected earnings. Diversified industrial Curtiss Wright delivered solid earnings from its defence electronics and naval and power businesses. Frontdoor, a provider of home warranty plans, executed well amidst a chal lenging housing market, with strong retention and impressive sales from its non-warranty business lines. On the negative side, construction materials company Eagle Materials suffered from lower volumes because of adverse weather and also experienced higher maintenance costs. Boxboard packaging company Graphic Packaging faced lower demand from a consumer base that is becoming more price sensitive. Business process outsourcer Genpact released good results but reduced its guidance as economic uncertainty is slowing decision making at the company’s clients.

The UK portfolio outperformed its benchmark in May. IT services business FD Technologies received a takeover bid from private-equity firm TA Associates. Shares of casino and gaming operator Rank Group climbed after the UK Government published the first of its casino statutory instruments. Defence firm Chemring Group benefited from increased defence spending commitments by governments, prompting analysts to raise their earnings forecasts for the company. However, not all companies fared well Auction Technology Group struggled with a lower-than-expected
take rate in its arts and antiques business. Flexible office-space provider Workspace Group reported lower occupancy and reduced its profit expectations. Unfavourable weather in the current trading period led to a reduction in earnings guidance by bowling alley operator Hollywood
Bowl.

The European portfolio strongly outperformed its benchmark during the month. RENK Group, an Austrian manufacturer of drive systems for military vehicles, reported robust orders and consequently earnings forecasts for the company rose. Bank of Ireland also delivered good results, along with the wider European banking sector. Kardex, a producer of materials-handling systems, received a broker upgrade. Glass-bottle manufacturer Vidrala suffered from a selloff in the sector because of lower volumes. Despite reporting good results, construction materials specialist Buzzi Unicem adopted a cautious stance and maintained its earnings guidance for the year, disappointing some investors. Pharmaceuticals producer Siegfried Holding was downgraded by a broker.

Returns in Japan were behind the MSCI Japan Small Cap index in the month. Positive contributors included Mitsubishi Logistics and gaming technology producer Sankyo, both of which reiterated their commitment to share repurchases. Diversified industrial IHI revealed ambitious plans to grow its presence in the promising area of satellite technology. Higher labour and technology costs dampened the outlook for confectionary producer Morinaga. Apparel retailer PAL Group came under technical selling pressure as a large shareholder reduced its stake in the business. Media company Toho suffered from concerns over tariffs on non-US films.

In aggregate, the Rest of World fund holdings underperformed the MSCI Asia ex-Japan Small Cap index during the month. The Utilico Emerging Markets investment trust outperformed the index. The Pinebridge Asia ex Japan Smaller Companies and Schroders Global Emerging Markets Smaller Companies funds as well as The Scottish Oriental Smaller Companies investment trust lagged the local benchmark.