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Industrials
In a bid to bolster its investment proposition and appeal to shareholders, Montanaro European Smaller Companies has recently initiated a series of strategic measures. These initiatives are designed to enhance liquidity, reduce discount volatility, and create value for all investors. The measures include regular tender offers, an active share buy-back policy, and a reduction in management fees.
Montanaro European Smaller Companies Trust primarily invests in smaller quoted companies across Europe, with a focus on achieving capital growth that surpasses the MSCI Europe Small Cap Index[3][4]. The trust is managed by Montanaro Asset Management Limited (MAML), which is renowned for its thorough and detailed research-based investment process[4].
The board of Montanaro European Smaller Companies has proposed conducting regular tender offers, allowing shareholders to tender their shares at a 5% discount to the net asset value (NAV). These offers will occur twice annually, around the time of the interim and final results publications. Each tender is capped at a maximum of 5% of the trust's total issued shares, ensuring that existing shareholders are protected while improving liquidity management for the underlying portfolio[1][2].
In light of changing market conditions and shareholder expectations, the trust is revising its share buy-back policy to be more proactive. The primary goal is to reduce discount volatility by targeting a single-digit discount in normal market conditions. This approach not only stabilizes share prices but also leads to accretion in net asset value when shares are bought back at a discount, benefiting all shareholders[1][2].
The trust has negotiated a reduction in management fees as part of its cost review. Starting April 2025, the fees will decrease from 0.9% to 0.825% per annum on the market capitalization up to £500 million, from 0.75% to 0.70% between £500 million and £750 million, and remain at 0.65% above £750 million[1][2].
These strategic measures are anticipated to create significant value for shareholders by addressing liquidity and discount volatility. The trust's proactive approach to managing its discount through buy-backs and regular tender offers can stabilize share prices and potentially narrow the current discount to net asset value. This is particularly important given the trust's history of performance; despite recent volatility, Montanaro European Smaller Companies has long-term outperformed its peers and benchmark[4].
The decision to implement these measures comes at a time when investor sentiment towards European smaller companies is renewing. The "SmallCap Effect," which suggests that smaller companies tend to outperform larger ones over the long term, presents an opportunity for investments like Montanaro European Smaller Companies[3]. Moreover, the inefficiencies in the SmallCap market allow for strategic investments that can yield higher returns through thorough research and analysis.
Montanaro European Smaller Companies' strategic initiatives underscore its commitment to improving shareholder value and adapting to changing market conditions. By enhancing liquidity, stabilizing the discount, and reducing costs, the trust positions itself well for benefiting from renewed investor interest in European smaller companies.
Investing in European SmallCap companies offers several advantages:
Montanaro European Smaller Companies, with its focus on quality growth and comprehensive research, is well-placed to capitalize on these opportunities.
Investors interested in Montanaro European Smaller Companies can access the trust through various platforms, including AJ Bell, Hargreaves Lansdown, and Interactive Investor[3]. For more detailed information, prospective investors can consult the trust's official website or contact their financial advisors.
