Turnaround stocks star at Strategic Equity

25th Feb 2011 16:01

Strategic Equity, the investment trust focused on smaller UK companies with a market capitalisation of less than £150m, saw net asset value per share rise by more than a third in the second half of 2010.Net asset value (NAV) per share at the end of 2010 stood at 90.45p, up from 66.72p at the end of June 2010, an improvement of 35.6%. The gain was driven by a combination of continued strong operating performance across the portfolio, particularly specialist electronics companies, and the positive impact of the company's investment in Strategic Recovery Fund II.Seven of the top eight contributors to the rise in the value of the portfolio have recently experienced either significant change to their board of directors or major restructuring programmes, and in many cases both, the investment manager, SVG Investment Managers, observed.The 35.6% gain in the NAV per share left the company's benchmark index, the FTSE SmallCap (excluding investment companies), trailing in the dust; the index rose by 14.8% over the period. The trust is focused on capital appreciation rather than income and, consistent with its policy, it has not declared a dividend."The investment outlook for the company remains positive," claimed the trust's chairman, John Hodson. "Despite strong performance since its 2008 low, the UK smaller companies market remains both undervalued in an absolute sense, and one of the cheapest equity markets in the world on a relative basis. Investor appetite for smaller companies appears to be increasing, reflected in both increased M&A [mergers & acquisitions] activity and net buying of equities and funds by investors for the first time in several years," he added.