Scottish Oriental Smaller Cos Trust (LON:SOST) was launched in 1995, aiming to generate long-term capital growth from a portfolio of small-cap Asian equities (excluding Japan and Australasia). When Wee-Li Hee returns from maternity leave in July 2017, she will assume the role of co-manager; interim lead manager Vinay Agarwal has become lead manager on a permanent basis. SST’s board has been strengthened with the March 2017 appointment of Jeremy Whitley as a non-executive director. While the trust’s focus on preserving capital led to underperformance versus the benchmark and peers in 2016 (which was a year characterised by strong equity returns), SST’s longer-term performance record remains intact. It has outperformed its benchmark and the peer group average over five and 10 years.
Investment strategy: In-depth fundamental research
Lead manager Vinay Agarwal and his team undertake rigorous fundamental analysis, seeking to identify high-quality, small-cap Asian equities that are trading on reasonable valuations. Portfolio turnover is currently higher than historical averages as the new lead manager has reduced the number of holdings from c 100 to c 60; he states that the portfolio reorganisation is nearly complete. The bottom-up investment process means that SST’s sector and geographic exposure can deviate significantly versus the benchmark MSCI AC Asia ex-Japan Index. At end-April 2017, SST had a net cash balance of 9.4%; this is higher than average as the manager is waiting for more attractive company valuations before investing.
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