The trusts portfolio is diversified and will normally consist of investments in over 80 individual companies.
In seeking investments the approach will be fundamental in nature involving regular contact with the management of prospective and existing investments in conjunction with rigorous financial analysis of these companies. The emphasis within the portfolio will reflect the desire to invest in companies whose shares represent relatively attractive value and a preference for holdings with low or no gearing.
They have today published final results for the full year to 31st December 2016.(link via Investegate)
Share price total return for the past year is a disappointing -4.2% - due in part to a widening of the discount margin - ompared to its benchmark index, Numis Smaller Companies index - Total Return of 11.1%. The return for the FTSE 100 in 2016 was 19% by way of comparison.
I was pleased to note that management charges have fallen this year and ongoing charges are now 0.9%.
Although this years results have been poor, the trust has been the best performing IT in my portfolio over recent years. Over the past 5 yrs average annualised return for this smaller companies specialist is 17.9% p.a. It is widely accepted that smaller companies is one area where managed funds often produce better returns than the index. For example, the equivalent figure for Vanguard’s Global Small Cap index fund over the past 5 years is 17.2%.
|5 Yr Chart ASL -v- Vanguard Global Small Cap Index|
(click to enlarge)
The board are proposing a final dividend of 18.75p making a full year increase of 5.2% to 27.35p per share. In addition, as last year a special dividend of 2.75p is proposed as the trust has received five such dividends from portfolio holdings. Revenue reserves have increased by a further 11.5% to £69.64m (2015 £62.4m).
At the current price of around £11.50, the trust has a yield of 2.4% (excluding the special dividend).
I would not advocate a large holding of small caps in any portfolio, however a weighting of between 5% - 10% is likely to boost total returns for the long term investor.
Although currently not one of the highest yielders in my SIPP, I am happy to continue with Aberforth for the longer term for delivery of growth and steadily rising income.
As ever, slow & steady steps…..