Shares of smaller companies lagged their larger-cap peers in October. The strongest performing sectors were technology, telecommunications and health care. The laggards were basic materials. financials and consumer staples. Economic data points in the UK, Europe and the emerging markets were generally ahead of expectations while those in Japan were below estimates. Data from the US was sparse because of the government shutdown.
Trade tensions sparked some market volatility as China announced restrictions on rare-earth exports and President Trump threatened retaliatory tariffs. However, stocks rebounded after concessions from both sides. Investors were also encouraged by better-than-expected quarterly earnings and hopes of further interest rate cuts in the US because of weak private-sector jobs data and the likely hit to growth from tariffs and the government shutdown. Japan elected Sanae Takaichi as its first female prime minister.
The Trust’s net asset value (NAV) was up 1.0% in October, underperforming the benchmark. The discount to NAV widened in October.
In North America, our portfolio underperformed the local index. Kirby saw improved utilisation in its inland barge business and strong growth in demand for its power-generation equipment. Western and work-wear retailer Boot Barn bounced back as it revealed robust same-store sales growth and management increased its long-term target on store count. Bristow, which provides helicopter services primarily for the offshore oil industry, rose with the wider oilfield services sector. On the negative side, Wheaton Precious Metals gave back September’s gains as the gold price retreated and investors took profits. Brown & Brown, the insurance broker, fell as it revealed a slowdown in organic revenue growth. Graphic Packaging received a broker downgrade because of continued weakness in industry volumes.
The UK portfolio was behind its benchmark. Oxford BioMedica, a specialist in gene and cell therapy, announced good results with a growing order book. Molten Ventures, a technology focused venture capital group, reported solid NAV growth and strong realisations from its investment portfolio. Facilities management group Mitie revealed good trading momentum with healthy contract wins and progress on integrating its acquisition of Marlowe. Detractors included law firm Knights and payments company Paypoint; both were hit by profit taking. GlobalData, the data analytics and consulting group, also underperformed as management lowered its guidance for profit margins, citing investment costs and the slower-than-expected integration of an acquisition.
The European portfolio underperformed its benchmark. Konecranes, the Finnish crane manufacturer, announced very strong growth in orders. Online stockbroker flatexDEGIRO saw elevated levels of transactions translate into better-than-expected earnings. Buzzi Unicem, the Italian cement group, rose with the sector. Negative contributors included military equipment manufacturer Renk, which gave back some of its gains as President Trump pressured Russia to end the war in Ukraine. CTS Eventim, the events and ticketing group, saw further share price weakness as short positions increased. Do & Co, the airline catering company, fell on profit taking.
The Japanese portfolio outperformed the MSCI Japan Small Cap index. Positive contributors included Furono Electric; the marine equipment manufacturer saw strong demand and consequently delivered very good results. Engineering group Kinden announced better-than-expected profits because of significant expansion in its profit margin. IHI, the heavy engineering company, rose along with international peers as it reported good earnings. Detractors included clothing retailer PAL, which revealed lower profits in its apparel business. Nomura Real Estate saw earnings slip in its residential development arm and Nippon Television fell on profit taking.
In totality, the Rest of World fund holdings lagged the strong gains of the MSCI AC Asia ex Japan small cap index. This was driven by the underperformance of the Utilico Emerging Markets and Scottish Oriental Smaller Companies investment trusts and the Pinebridge Asia ex Japan Small Cap fund. On the positive side, the Schroders Global Emerging Markets Smaller Companies fund outperformed.
As at 31 October 2025
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