Brown Advisory US Smaller Companies

Brown Advisory US Smaller Companies (BASC)

02/11/2021

Results analysis from Kepler Trust Intelligence

Brown Advisory US Smaller Companies (BASC) has made a solid start under the new manager. From 01/04/2021, when Brown Advisory and Chris Berrier took over management, to 26/10/2021 the trust generated NAV total returns of 7% compared to a total return of just 4% for the Russell 2000 benchmark.

BASC has just reported results for the year ending 30/06/2021, during which period the previous manager, Robert Siddles of Jupiter, retired. The portfolio has now been aligned with the US Small-Cap Growth Strategy Chris has run for over 15 years, generating strong outperformance with lower than market levels of risk.

Kepler View

BASC has made a strong start under the new manager, despite quite challenging markets with rotations in style and macro uncertainty abounding. Yet despite generating good absolute returns and outperforming its benchmark significantly, the trust has seen its discount widen to 12% (as of 01/11/2021). This may reflect some profit taking in the US and global markets after a strong reflationary rally and late summer worries about a winter COVID resurgence. We believe it could represent a good long-term entry point.

Chris' strategy is to identify companies which can generate compound growth higher than the market over the long run. There is therefore a strong quality growth tilt to his style which contributes to attractive downside performance characteristics - something he explicitly targets.  The focus on repeatable earnings and downside risk means there is a bias to companies with a track record and good cash generation, which means 'meme stocks' and profitless companies are unlikely to feature in the portfolio. Chris runs a highly active strategy, with an active share typically in the 90% - 95% range.

While the strategy is new to the closed-ended space, Chris has been running it for many years in the open-ended space with success. Over the ten years to the end of August, the Brown Advisory US Smaller Companies UCITS Fund outperformed both the Russell 2000 Index and the Russell 2000 Growth index, with a beta below one and superior downside performance.

The current wide discount seems unwarranted to us and we believe this could be a good entry point to a strategy with an excellent long-term track record.

CLICK HERE TO READ THE FULL REPORT 

Visit http://www.trustintelligence.co.uk/investor for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.