Fund Research

ScotGems

Last update 09 September 2019

Material produced by Kepler Trust Intelligence should be considered as factual information only and not an indication as to the desirability or appropriateness of investing in the security discussed.

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Investment objective

ScotGems aims to provide long-term capital growth by investing in a diversified portfolio of small cap companies listed on global stock markets, across a range of sectors.

As at:

12/08/2019

Group/Investment

ScotGems

Ticker

SGEM

Management Company

Stewart Investors

Manager Name

Ashish Swarup; Tom Allen;

Association of Investment Companies (AIC) Sector

Global Smaller Companies

12 Mo Yield

0.0%

Dividend Distribution Frequency

None

Latest Market Capitalisation

£46,574,380

Latest Net Gearing (Cum Fair)

N/A

Latest Ongoing Charge Ex Perf Fee

1.47%

Turnover Ratio

63.4%

Shares Outstanding

53,533,770

(Discount)/ Premium (Cum Fair)

-8.8%

Daily Closing Price

87p

Source: Morningstar

ScotGems (SGEM) was launched June of 2017, and aims to deliver long-term capital growth from a portfolio of small cap companies operating in emerging markets. Managed by Stewart Investors, with Ashish Swarup as lead manager, the trust has a highly concentrated portfolio with just 25 holdings.

The manager’s investment style is inherently conservative, focusing on the downside risks as well as on the upside potential of any investment. Capital preservation is deemed as important to the manager as capital growth and this means that the trust has an extremely low beta and standard deviation relative to peers. Ideas are generated through the manager’s vast network of connections, and the team anticipate meeting over 1,000 companies over a year. This is a key part of the process, with the manager looking to recognise company ambitions, expectations and the way in which the company is run.

Since the inception of the trust two years ago, the trust has struggled in performance terms. Since launch, the trust has delivered -2.9% NAV total returns. In comparison, the trust’s ‘comparative indices’, the MSCI ACWI, MSCI ACWI Small Cap and MSCI Emerging Markets, have delivered NAV total returns of 19.1%, 7.3% and 7.3% respectively. Much of this is due to the strict valuation and quality criteria the manager has, and the fact that the most expensive companies have been those that have performed the strongest. Alongside this, the company has been deploying cash during this time and even at this stage has 13.1% of the portfolio in cash. Performance has improved year to date, with the trust delivering NAV total returns of 1.3%. Nevertheless, the trust has still struggled relative to peers and the company’s comparative indices.

After reaching heights of a 6% premium after launch, the trust has seen considerable discount volatility since then, and shareholders have found the discount widening to a c. 15% discount level. Since then, the discount has narrowed and the trust currently trades at close to 8% below par.

William Sobczak

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Fund History: ScotGems

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