Performance

Fund performance for the quarter ending March 2025 was -12.23%, versus the benchmark return of -6.12%, as measured by the MSCI World Small Cap Index (GBP).

Within the MSCI World Small Cap Index, Italy and Sweden were the main positive contributors for the Fund, while Canada and the UK were the main negative country allocations for the Fund.

In terms of sector performance, the Industrials and Materials sectors were the main negative detractors for the Fund. Information Technology was the best performing sector during the quarter, with Health Care being the second-best performer.

Portfolio Highlights

Notable positive contributors over the period were ADMA Biologics in the US and Brunello Cucinelli in Italy. Hammond Power Solutions in Canada and Greggs in the UK were the main negative contributors during the quarter.

ADMA Biologics is a US-based biopharmaceutical company headquartered in Ramsey, New Jersey. Founded in 2004, it specialises in developing and manufacturing plasma-derived biologics for patients with immune deficiencies and those at risk of serious infections. The company serves the health care and biopharmaceutical industries, focusing on providing lifesaving treatments for immunocompromised individuals (individuals with a weakened or impaired immune system), where it is harder for the body to fight infections and diseases like HIV, cancer, autoimmune diseases and genetic disorders. ADMA has several key products and treatments which enhance the immune system, reducing infection risks and improving quality of life. The company operates a large FDA-approved manufacturing facility with a capacity of 600,000 litres per year, supporting both its own production and external contract manufacturing.

In March, ADMA announced strong annual and quarterly results. Robust revenue and earnings growth drove the share price upwards with gross profit doubling from a year earlier. The Fund believes that ADMA has clear differentiation from its competitors given its strong vertical integration from plasma collection to manufacturing and distribution, which is expected to deliver a competitive advantage and unrecognised earnings growth in the coming years.

Hammond Power Solutions (HPS) is the main manufacturer of dry-type transformers in North America, alongside magnetic products and related equipment. Founded in 1917, the company has a longstanding reputation for providing high-quality and innovative solutions for power conversion, distribution and control applications. HPS specialises in designing and manufacturing a wide range of transformers, including low voltage, medium voltage, and specialty transformers for various industries such as the industrial, commercial and utility sectors.

The Fund believes that the ongoing investment to upgrade and expand the US electricity grid will lead to large demand increases for Hammond’s high quality electrical products.

Investment Outlook

The first quarter of 2025 has been characterised by heightened market volatility, largely driven by the reimplementation of aggressive tariff policies by the Trump administration. The decision to impose new trade barriers on China and key European industries introduced fresh uncertainty into global markets, contributing to fluctuations in equity valuations. The initial reaction has been significantly negative with risk assets selling off, however, certain regions and sectors demonstrated resilience, particularly Europe, which showed relative outperformance. The Fund remains overweight Europe versus the U.S given the attractive valuations and potential earnings upside we see in Europe driven by more business-friendly governments and potential fiscal spending plans coming to fruition with a focus on European infrastructure and defence.

The renewed trade tensions sparked sharp market swings, with investor sentiment shifting rapidly in response to political developments and economic data releases. While US equities faced headwinds due to trade concerns and neutral manufacturing PMI data, European markets fared better, supported by improving economic fundamentals. Notably, Germany, which had struggled with industrial contraction in recent years, reported ongoing improvements in their manufacturing PMI, signalling a potential turning point for its economy. Broader European manufacturing also showed encouraging signs of recovery, providing a counterbalance to softness in the US.

One of the more striking trends of the quarter was the indiscriminate selling of some high-quality companies, a reflection of broader risk aversion rather than fundamental weakness in our view. Hammond Power Solutions was among the names that experienced significant share price declines despite strong operational performance. This pattern suggests that investors, spooked by macroeconomic concerns, moved capital away from fundamentally solid businesses, creating potential opportunities for long-term investors willing to look past short-term noise. HPS reported its 4th quarter and full year results during March and highlighted ongoing strong revenue with record sales of CAD $208m, an increase of 11.5% year on year. The company continued to call out strong order backlogs and ongoing demand for its customised transformer solutions.

Given these macroeconomic developments, we have maintained a balanced approach in portfolio positioning. The sell-off in certain high-quality stocks has presented selective buying opportunities, particularly in companies with strong balance sheets and long-term growth potential. We continue to believe that electrical grid investment should remain strong, benefiting companies like Hammond Power Solutions. We also see relative strength in Europe continuing and have selectively increased exposure to names that stand to benefit from improving business conditions backed by fiscal spending packages in this region.

Looking ahead, much will depend on the evolution of trade policy and the resilience of corporate earnings in the face of ongoing uncertainty. However, we continue to see opportunities for global small cap companies that are niche leaders within their industry that we believe can deliver unrecognised earnings growth.

Data source: Ausbil and Morningstar

‍

Risk Warnings

Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds. Our funds invest for the long-term and may not be appropriate for investors who plan to take money out within five years. The Fund will be exposed to stock markets and market conditions can change rapidly. Prices can move irrationally and be affected unpredictably by diverse factors, including political and economic events. The Fund will be exposed to smaller companies which are typically riskier than larger, more established companies. Difficulty in trading may arise, resulting in a negative impact on your investment. Shares in smaller companies may be harder to sell at a desired price and/or in a timely manner, especially in difficult market conditions. The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of your investment. In certain market conditions some assets may be less predictable than usual. This may make it harder to sell at a desired price and/or in a timely manner. In extreme market conditions redemptions In the underlying funds or the Fund itself may be deferred or suspended. This material is for distribution to professional clients only and should not be distributed to or relied upon by any other persons. It’s provided for general information purposes only and is not personal advice to anyone to invest in any fund or product. Information taken from trade and other sources is believed to be reliable, although we don’t represent this as accurate or complete and it shouldn’t be relied upon as such. Calls will be recorded for training and monitoring purposes.