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Montanaro UK Smaller Companies
There may be a buying opportunity for income investors in this highly rated small-cap trust
Small caps aren ’ t a traditional hunting ground for income investors , as they tend to reinvest excess cash to fund further growth rather than return it to shareholders in the form of dividends . However , Montanaro UK Smaller Companies has committed to distributing 1 % of its net asset value to investors every quarter . Another reason why income investors have traditionally shied away from small caps is their unpredictability : while they tend to deliver higher returns over the long term , they fall further when there is a market correction . This has been the case this year , with the Numis Smaller Companies ( ex ITs ) index down 20.2 % in 2022 so far , compared with a drop of just 1 % from the FTSE 100 . Montanaro UK Smaller Companies has not been immune to this volatility , and is down 33.8 % over the past year . However , this may have opened a buying window in a vehicle that has delivered a respectable income and doubled investors ’ money over 10 years . The trust is currently trading at a discount of 8.4 %, which analysts at QuotedData said “ could be a great opportunity for long-term investors ”. Manager Charles Montanaro believes small-cap valuations are at their most attractive level in years following the sell-off . The quality growth companies he favours have been hit particularly hard this year , but he said their pricing power means they should be well placed to protect against inflation . “ We have been focusing as always on our companies and understanding how they are affected by the
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