The £168m Jupiter US Smaller Companies investment trust has blamed its under-performance on a focus on capital preservation.
The trust returned 17 per cent for the year to 30 June, compared with 29 per cent for the average fund in the AIC North America Smaller Companies sector.
In the trust's annual report, released yesterday (10 October), Gordon Grender, chairman, said the under-performance "requires some explanation".
He said: “The company takes a risk averse approach to investment and aims to achieve long term capital growth with capital preservation.
"This approach was successful in preserving capital during the bear market of 2008 and adding value in the early years of the economic recovery (2009 to 2012).
"To achieve this the company avoids areas of the stock market that are high risk, such as technology and biotech, as well as shares that we believe to be expensive.
"As a result of taking this approach, asset value growth failed to match the growth in the index. In the year under review, the Russell 2000 Technology sector rose 41 per cent in sterling terms, an exceptional performance which contributed to the substantial increase in the Russell 2000 index."
Mr Grender said that because of low bond yields the big defensive stocks in the market have been pushed to valuations the trust considers unsustainable.
To avoid those sectors the trust invested in stocks cheaper than the market average but he said investors became disenchanted by the potential for US President Donald Trump to ignite the US economy, meaning cheaper stocks were sold off.
Mr Grender said many of the stocks had performed well recently and he predicted technology companies and consumer staples would under perform as US interest rates continue to rise, benefiting the sectors he is invested in, such as consumer discretionary businesses and financial companies.
The Jupiter US Smaller Companies trust trades at a discount to net assets of 7.7 per cent.
david.thorpe@ft.com
