Downing Strategic Micro-Cap Investment Trust (LSE:DSM)

“Downing Strategic Micro-Cap Investment Trust Plc – Aims to take influential positions in a focused portfolio of UK micro-caps”

The Trust seeks to provide investors with long-term capital growth through a concentrated portfolio of 12-18 UK listed companies that typically have a market capitalisation of below £150 million (at the time of investment). We define these as micro-caps. The Trust intends to take an influential position (around 3% - 25% equity stake) in each underlying business.



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Portfolio commentary

The Trust’s NAV increased by 5.57% over the period. Positive contributions came from Ramdens and Volex, while the main detractors were FireAngel Safety Technology and Gama Aviation.


Below are a series of announcements we believe indicate that the strategic initiatives we have helped put in place are beginning to deliver on their objective of value realisation:


Duke Royalty announced its interim results for the six months ended 30 September 2019 and highlighted material increases to the group’s revenue, profitability and cashflow. Importantly, the dividend increased for the third time since inception.


FireAngel issued a trading update and warned that results for the year ending 31 December 2019 are expected to be below market expectations. Significant sales growth in 2019 stressed the company’s processes and it anticipates lower revenue from European and trade sales being only partially mitigated by lower margin business in the group’s retail and fire & rescue services business units. The board is focussed on gross margin, EBITDA and operational cash generation, and remains optimistic for future profitable growth. Gama announced a litigation update regarding various legal proceedings. The board welcomed the settlement of the SPC Aviation case, continuing progress on the Taleveras case and the imminent conclusion of the ASECNA case. The board continues to anticipate a net cash inflow as an overall result of all litigation matters subject to the successful collection of the Taleveras trade receivables.


Hargreaves Services provided a market update ahead of reporting its interim results. Management reported that trading has been satisfactory, and it anticipates reporting interim results in line with its expectations.


Ramsdens announced its interim results for the six months ended 30 September 2019 and highlighted a 30% increase in revenue and a 23% increase in profit. A 13% increase in the interim dividend reflected Ramdens’ continued growth and the board’s confident outlook. Volex made no material news announcements during December. The group previously issued strong results and we believe the market is really waking up to the story now. We think that the group remains undervalued and is now enjoying a rerating.

13th January 2020.

Judith MacKenzie



Lead Investment Manager

Judith founded Downing Public Equity in 2009 and was named Small-Cap Fund Manager of the Year at the Small- Cap Awards in 2013 and 2015 for the Downing UK Micro-Cap Growth Fund.

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Investment rationale

     Private-equity approach to research and engagement seeks to unlock greater shareholder value over the longterm.

     We believe a strategic, proactive investment approach can help smaller companies realise their potential.

     UK microcaps offer a wider investment universe and can offer better value relative to larger caps (Factset).

Share price information, the latest investor letter which contains comprehensive information on the Trust’s performance, strategy and holdings, plus historical factsheets, RNS announcements, and

video interviews with the manager, are all available

to download from the homepage of the Downing Strategic Micro-Cap Investment Trust website.

Trust objectives:

The Trust aims to generate a return of 15% p.a. compound over the long term. Please note that this is a target only and is not guaranteed.

The Manager employs a value approach and seeks to be influential through taking strategic stakes.

The Trust seeks to hold a concentrated portfolio between 12-18 holdings.

The Trust will typically hold between 3 – 25% of the equity of investee companies, notwithstanding ability to use debt instruments alongside equity.

Long-term investment horizon over three to seven years.


Buyback mechanism for up to 14.99% of the equity of the Trust seeking to closely control discount (at the Board’s ultimate discretion and subject to shareholders’ annual approval).

Company information

Launch date 9 May 2017
Morningstar sector UK Smaller Companies


Judith MacKenzie

James Lynch

Alyx Wood

Nick Hawthorn


Hugh Aldous, Chairman
Andrew Griffiths, Non-Executive Director

Linda Bell, Non-Executive Director

Robert Legget, Non-Executive Director

Risk warning: 

Your capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in smaller companies will normally involve greater risk or volatility than investments in larger, more established companies. Performance figures are taken from daily valuations provided by Maitland Institutional Services Limited. Return is the total return (value of the investments plus cash including income after all expenses and charges), ignoring taxation. Because shares in an investment Trust are listed on the London Stock Exchange their price is affected by supply and demand. This means that the share price may be different from the NAV. The Company’s investment strategy may involve the use of leverage, which exposes the Company to risks associated with borrowings. Please note that past performance is not a guide to future performance.

Important notice

This document has been approved and issued by Downing LLP (“Downing”), St Magnus House, 3 Lower Thames Street, London EC3R 6HD. This document is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. Opinions expressed in this document represent the views of the Investment Manager at the time of publication, are subject to change, and should not be interpreted as investment advice. You should only invest based on the information contained in the relevant product literature available from Downing. Downing does not offer investment or tax advice or make recommendations regarding investments. Please see the relevant product literature for details of charges; your attention is drawn to the risk factors contained therein. Downing is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England No. OC341575.

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The value of investments can go down as well as up and you may get back less than you invested. 
We provide information about investments but do not offer personal advice and recommendations. We do not hold responsibility for assessing the suitability of an investment or evaluating the risks of such an investment for you.  If you are in any doubt as to these risks or the suitability of an investment.  Y
ou should seek independent advice.