Montanaro European Smaller Companies (MTE) has generated impressive returns for investors over the past year and has outperformed its benchmark in four of the past five 12-month periods. The trust is ahead of both its benchmark and its peer group average by more than 80 percentage points over the five years ended 30 September 2020
The manager’s focus on high-quality and growing companies positioned MTE well when COVID-19 hit markets earlier this year. The portfolio includes many innovative and promising businesses, some of which are beneficiaries of the shift to home working and investment in healthcare that the pandemic has fostered.
The trust’s impressive returns have attracted new investors, helping to eliminate its discount. It seems anomalous that MTE is the smallest of the European small-cap trusts. We believe the next step for MTE should be for it to expand by reissuing those shares that it holds in treasury (see page 17) where possible.