BROWN ADVISORY US SMALLER BUSINESSES: Trust chooses companies that can recover first

It was something of a baptism of fire for Christopher Berrier since becoming an investment fund manager Brown Advisory US Smaller Companies spring 2021.

But Berrier, based in Baltimore, Maryland, is confident that better times could be ahead for the trust’s investors — especially if interest rates in the United States start to fall, the economy gets back on track. and sentiment towards US smaller companies is improving.

Berrier was appointed by the trust’s board to lead the fund from April 2021 following the retirement of manager Robert Siddles, who worked for British investment house Jupiter.

The change of manager and fund group led to the rebranding of the trust – from Jupiter US Smaller Companies to its current name.

When the changes were announced, the then-trust chairman said Brown Advisory’s appointment “should lead to strong performance, a smaller discount and ultimately the opportunity to grow the business over time.”

Unfortunately for the shareholders, things did not go quite as the former chairman had expected.

While the stock price performed well in 2021, the past calendar year has been a nightmare – not just for the fund, but for all investors with money in the shares of smaller companies (US or here in the UK).

As a result, the trust under Berrier’s command has posted losses of 11 percent, while shares are discounted more (17 percent) than when the ex-chairman expressed his verdict on the fund’s prospects under the wing of Brown Advisory.

Berrier admits that it has been a difficult time and accepts that the clouds have yet to lift. He says stock market volatility will continue for now, but he is encouraged that the US economy is performing “less badly” than many predicted a year ago.

“What is hard to predict,” he says, “is the new economic normal that will unfold as interest rates begin to fall.

“It could be a prolonged period of slow economic growth. But whatever the background, we are determined to make it a virtue from an investment point of view.”

Berrier says it’s indisputable that the stocks of many smaller US companies look cheap — and that if there is a strong (and broad-based) recovery in the US stock market, they will likely lead the way.

He adds, “If you look back to 1993 and 2000, when valuations of smaller US companies were similar to today’s, small caps outperformed large cap US stocks for years to come. If this happens again, the trust is well placed to take advantage.”

The fund is valued at £142 million and is invested in 78 stocks. It is managed in a disciplined manner and no stock may represent more than five percent of the portfolio.

Stocks that enter the fund do so because they demonstrate sustainable growth potential, good governance and the ability to scale their businesses as they succeed.

The largest holding company, waste management specialist Waste Connections, accounts for 3.7 percent of the trust’s assets.

“It’s a company I’ve known for a long time – from before I joined the trust,” says Berrier. “It embodies everything we want from a company. It cares for its employees in a sometimes challenging job that meets our governance framework.

It has also continued to grow by identifying new markets in both the United States and Canada – while acquiring competing companies. It’s a success story that brings in a lot of money, and we like that.’

The annual fee is just under one percent and the fund’s exchange identification code is 0346340.