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Standard Life Investments Global Smaller Companies Fund research update

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Over the long term smaller companies have tended to perform better than their larger counterparts, although they are higher risk and more volatile. Recent performance has been more subdued. For the past year global economic activity has been slowing which is not a positive operating environment for smaller companies.

However, the outlook is improving and economic growth could be expected to rise over the coming year, according to Harry Nimmo and Alan Rowsell, managers of the Standard Life Investments Global Smaller Companies Fund. Against this backdrop, they expect smaller companies to perform well.

The managers prefer to invest in businesses with the ability to grow organically over those which grow through the acquisition of other firms. They seek companies with high-quality business models, strong cash flows and recurring revenues.

Harry Nimmo and Alan Rowsell are currently finding companies with these characteristics in the healthcare and financial sectors. Over the past six months, exposure to these areas has been increasing. Within the healthcare sector they are particularly positive on BTG, a growing UK biopharmaceutical company with a breakthrough varicose vein product, and US dental firm Align Technology.

The increased financial sector exposure has been partly due to the purchase of shares in Paragon, a UK challenger bank. Paragon is expanding its product offering in buy-to-let mortgages and consumer products, while large high street banks have less cash to invest in growth due to increased capital requirements.

Performance of the Standard Life Global Smaller Companies over three years

Past performance is not a guide to future returns. * Lipper to 01/05/15

Annual percentage growth
May 12 -
May 13
May 13 -
May 14
May 14 -
May 15
Standard Life Global Smaller Companies 17.9% 6.0% 16.8%
IA Global 17.9% 9.7% 12.0%

Full year performance figures before this date are unavailable

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Our view on this fund

Following a promising start the fund has struggled to keep pace with the peer group over the past year, particularly between mid-March 2014 and August 2014. Despite this the fund has outperformed the IA Global sector by 6.5%* since its launch in January 2012, returning 54.3%, but please remember past performance is not a guide to future returns and this is only over a relatively short time period. Our analysis suggests the fund's returns are mainly down to the managers' stock selection. The fund operates a concentrated portfolio which enables each holding to make a significant impact, on returns although this is a higher-risk strategy. Its global mandate allows the managers access to a wider range of opportunities than exist in the UK, including those in higher-risk emerging markets. We remain confident in the managers' ability to add value over the long term and the fund retains its place on the Wealth 150 list of our favourite funds across the major sectors.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down as well as up, this means you could get back less than you invested. Therefore all investments should be regarded with a long term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of an investment please contact us for advice.
Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.

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