Best In Class  

Best in Class: BMO Global Smaller Companies

Best in Class: BMO Global Smaller Companies

This week I’ve be doing a bit of reading on Portuguese explorer Ferdinand Magellan.

Mr Magellan was the man who orchestrated the Spanish expedition to the East Indies from 1519 to 1522.

The five-strong fleet of ships became known for being the first to circumnavigate the world when they returned to Spain, but it was not without setbacks, including a mutiny, a shipwreck and Mr Magellan’s own death in the Philippines in 1521.

He joins the list of other famous explorers like Juan Ponce de Leon, James Cook and Zheng He – all of whom did not make it home from their missions to explore new horizons, make scientific advancements and create economic wealth.

Going global is currently the popular choice in the investment world, as investors look to stave off geopolitical uncertainty and slowing economic growth.

Thankfully, as this week’s best in class shows, going global for new opportunities is a lot safer than it used to be.

The BMO Global Smaller Companies investment trust invests directly in small quoted companies and in funds investing in smaller companies.

It was recently cited by the Association of Investment Companies as one of the top 20 most consistent performers in the past decade, having produced a 351.1 per cent share price total return in that time and having outperformed the overall weighted average in eight out of the 10 years to July 1 2019.

The trust is also recognised as an “AIC Dividend Hero” having produced 49 years of consistent dividend growth.

In the past 10 years the trust has turned a £1,000 investment, with dividends reinvested, into £4,624 compared with £3,033 for the IT Global Smaller Companies sector average, according to FE Analytics, total returns for the 10 years to July 17 2019.

BMO Global Smaller Companies launched as the Alliance Investment Company in 1889, with initial share capital of just £1m.

It originally invested mainly in overseas government bonds but, in 1975, the board decided to focus on smaller company equities.

The trust has been managed by Peter Ewins since 2005. He is a director and portfolio manager in the global small-cap equity team.

He joined the firm in 1996, having previously worked for Municipal Mutual Insurance and Commercial Union Insurance.

The philosophy behind the trust is to go where other equity researchers will not, in order to find hidden gems at attractive prices.

Mr Ewins and his team believe that picking the right stocks is far more important than being invested in the right sectors of the economy or in the right countries.

They target companies with strong franchises and good quality, motivated management teams, where share prices do not look expensive.

Ideas come from many different sources and each team member will contribute, although ultimately the decision to buy or sell rests with Mr Ewins. The portfolio typically holds between 180 to 200 individual investments.