Montanaro UK Smaller Companies Investment Trust PLC on Friday said its net asset value per share declined in the first half of its financial year due to higher interest rates.

London-based Montanaro UK is an investment trust focused on investing in small quoted companies listed on the London Stock Exchange or traded on the AIM.

Montanaro UK’s NAV per share declined 23% to 104.4 pence in the six months to September 30, down from 135.5p the year before. This comes as global financial markets have been rocked by higher inflation and rising interest rates. Montanaro UK said all major asset classes, including government bonds and oil, fell in the six month period.

The threat of higher interest rates has stalked markets, leading to a ‘significant’ de-rating of growth stocks, Montanaro UK said. It added that the rotation out of Quality and Growth continued at a slower pace as the year progressed, resulting in an ‘extremely difficult period’ for investors.

Montanaro UK reported a 25% decrease in its share price to 94.0p from 125.0p.

‘We are sorry that shareholders in Montanaro UK have suffered in 2022 and that returns have been so disappointing. However, such extreme periods of losses in the past have typically led to periods of sustained positive returns,’ Chair Charles Montanaro said.

‘Montanaro UK’s calendar year absolute performance to date has been this weak on only two prior occasions in over 27 years (2002 and 2008).’

Nevertheless, Montanaro UK said it is feeling increasingly optimistic about the next 12 months as investors are looking to position themselves for an economic and stock market recovery.

Montanaro UK shares were up 2.0% to 113.70p on Friday morning in London.

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