Interactive Investor

TR European Growth rings changes to broaden appeal to retail investors

14th October 2021 11:49

Kyle Caldwell from interactive investor


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The trust has announced a share split and a change a name, but the investment strategy will remain the same.

The board of TR European Growth (LSE:TRG) a member of interactive investor’s Super 60, has made a number of changes in a bid to broaden its appeal to retail investors.

This morning, as part of financial results for the year to the end of June, the trust announced that it will rename the company The European Smaller Companies Trust.

The board will also implement an 8:1 share split, which it says “will improve the liquidity of the company's shares and enhance the ability of investors to make more efficient regular monthly investments on share dealing platforms”.

The share split requires shareholder approval at the trust’s annual general meeting on 29 November 2021. Those investors who cannot attend can submit their votes by proxy.

There will also be a reduction in the management fee. The charge will drop from 0.6% of net assets up to £500 million and 0.5% above that figure, to 0.55% of net assets up to £800 million and 0.45% thereafter.

The final change will be a switch in its benchmark (effective from the start of next July), with the Euromoney Smaller European Companies (ex UK) Index replaced with the MSCI Europe ex UK Small Cap Index. The board said the change will better align the trust with peers.

The investment objective and fund manager’s approach to stock picking will remain the same.

The board said: “With this combination of changes, we aim to increase demand for the company's shares which will, in turn, narrow the discount achieving a better alignment of the share price and net asset value (NAV), and therefore be of benefit to all shareholders.”

In terms of the trust’s results, it reported a strong year. The trust’s underlying investments, the NAV return, rose by 63.5% and its share price was up 79.5%. This was notably ahead of the benchmark return of 36.5%. In addition, a dividend of 25p per share was paid, representing a yearly increase of 13.6%.

Ollie Beckett has run the trust since 2011. He invests in small and medium-sized companies that have exceptional growth potential. He looks for undervalued companies that can either deliver substantial growth or where there is potential for improvements in profitability through self-help.

Giving his outlook for the months ahead, Beckett says that given that global markets have generally moved higher since last April,“it is hard to argue that the markets look cheap”.

He adds: “There is a very noticeable bifurcation of the market into a subset of incredibly expensive growth stocks and a long tail of more reasonably priced companies. As managers, we have been trying to recycle capital from the expensive into the attractively priced, aiming to find the next stock that will be perceived as a market darling.

“While the market in general is skewed by the tail of expensive stocks, we feel that the multiples paid on the broader portfolio remain attractive. There continues to be a large number of neglected opportunities for us to pursue and we believe we can continue to deliver value for our shareholders.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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