Gresham House’s Ken Wotton on why he gets stuck in to back small companies that can win big INVESTING SHOW

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Britain’s big beast FTSE 100 companies are often saddened for their lack of enthusiasm, but there are highly innovative companies on the opposite end of the UK stock market.

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Small company investors can benefit from overlooked opportunities in a market with little research, lots of headroom for potential growth, and a management team with plenty of skin at play.

But choosing quality small caps requires a lot of research and building a portfolio that can weather any storm that could severely affect their more volatile share prices.

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Some small corporate funds and trusts deal with this by spreading their risk across 50 to 100 stocks, but Ken Wotton of Gresham House has not adopted this approach to managing Strategic Equity Capital Trusts.

Instead, it has a tight portfolio of only 17 companies that the fund management team wants to be directly involved in working together to build a successful business and investment.

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It describes it as applying private equity-style techniques to private companies.

On this episode of The Investing Show, Ken Wootton joins Richard Hunter and Simon Lambert to talk about Trust’s vision and why he sees small UK companies as having the potential to deliver strong returns for years to come. Huh.

But he says investors should look at companies individually and examine their prospects rather than applying a broad-brush approach.

Kane highlights some of the companies he’s backing and why, and explains why even though he may be investing in growth companies, they’re looking for profits right now rather than the promise of a jam tomorrow.

In the last one year, the trust has given 61.4 per cent return as it has reaped more from Covid recovery as compared to the average return of 53.2 per cent of AIC Small Companies sector. However, it lags behind the sector average of 49 per cent with a return of 42 per cent in three years. It has an ongoing fee of 1.07 percent and trades at a discount of 13.3 percent on the net asset value.

Top Ten Holdings in Strategic Equity Capital Investment Trust at the end of September 2021

Trust has outperformed the FTSE Small Cap Except Investment Trust Index since 2009

Trust has outperformed the FTSE Small Cap Except Investment Trust Index since 2009

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