By James Thorneley Gartmore Growth Opportunities trust, formerly known as NatWest Smaller Companies,...
By James Thorneley
Gartmore Growth Opportunities trust, formerly known as NatWest Smaller Companies, will be actively marketed to IFAs in the autumn.
The final marketing strategy has yet to be finalised, but Ian Overgage, investment trust marketing manager at Gartmore, said there would be a series of roadshows held around the country hosted by Gervais Williams, manager of the trust.
Williams hopes by increasing the profile of the trust its discount will narrow. The trust is currently trading on a discount to NAV of 22.8%, compared to an average discount in the AITC smaller companies peer group of 20%.
At the roadshows Williams will explain the difference between Gartmore Growth Opportunities and Gartmore Smaller Companies investment trust managed by Frank Manduca.
Williams said: "The Gartmore smaller companies team works closely together so there is a degree of overlap between the two portfolios, although I do take more active positions in some areas where Frank doesn't." The main difference between the two trusts is in their corporate structures. Gartmore Smaller Companies can be regarded a plain vanilla conventional trust while Gartmore Growth Opportunities offers ordinary shareholders highly geared exposure to the smaller companies arena.
Last November the trust was restructured with a loan note issued. Until then the trust only had in issue ordinary shares, but following the issuance 70% of the trust now consists of ordinary shares with the remaining 30% made up of the loan note. Investors in the latter receive the same yield offered by the FTSE Smaller Companies index, currently 2.9%pa.
In addition holders will receive the same capital return as the index produces for the five years until the trust is wound up in 2005.
Ordinary shareholders get a geared return on their investment. When the trust is wound up they will receive the excess capital produced by the funds raised through the issue of the loan notes.
Within the trust's portfolio Williams is playing both value and growth stocks. In both areas he sees the market as having been highly inefficient. He said: "The setback in technology has led to indiscriminate selling of tech stocks whether they were at a fair value or not. Before the tech correction there had also been an indiscriminate sell off of old economy stocks even those which were using technology to grow the business."
Two of his best performing stocks have been IQE and Universal Salvage. The former manufactures small semi-conductors required in mobile phones. The shares were issued on Easdaq in June 1999 at $12.5 and have grown to $84 and are now listed on the London Stock exchange. Williams said: "There is still further upside potential as the company has the lionshare of the market and has also ordered virtually all the machines being made this year which help produce the semi-conductors."
Universal Salvage can be regarded more as value stock, according to Williams. The company disposes of motor vehicles which for insurance reasons are declared write-offs. It then sells on any spare parts it can salvage from the vehicles.
Williams said the company is increasingly using technology in its operation and so improving efficiency.
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