SCP targets unique exposures from the dynamic mid-cap index, which is arguably still cheap…by Ryan Lightfoot-Aminoff


This trust has been awarded a rating by Kepler Trust Intelligence for income & growth… Find out more



Managers Jean Roche and Andy Brough aim to build a portfolio of approximately 50 companies which offer unique exposures within the FTSE 250 Index. For Schroder UK Mid Cap (SCP), they are looking for quality companies whose business models are difficult to replicate, meaning they are able to deliver structural growth and provide good long-term returns for investors.

They focus on just the FTSE 250 as they believe it is a very dynamic market that is regularly refreshed and has a diverse range of quality companies operating in high-growth niches. The managers remain conscious of valuations though, which offers investors a slightly more value-orientated trust compared to the two direct mid-cap peers (see Portfolio).

Long-term Performance has been strong, with the trust outperforming the sector average and benchmark over three-, five-, and ten-year periods on a NAV basis. Despite a more challenging period in 2022, SCP has bounced back and is now ahead of all comparators over one year to 14/03/2023.

The managers have pointed to a number of factors that suggest that this recovery could continue through 2023. The current level of Gearing on the trust, at around 8%, is towards the top end of its recent history, reflecting some confidence in the investment opportunity.

Whilst capital growth is the primary objective, the trust pays an attractive Dividend which is supported by revenues. After a setback in 2020 as a result of the pandemic, the dividend has now returned to growth with the trust managing to pay out more in 2022 than it had in 2019, a record high 19p, in fact.


Analyst’s View


SCP is one of a number of trusts specialising in the dynamic UK mid-cap space. However, we believe the fact the managers only hold companies in the FTSE 250 sets the trust apart. Other peers continue to hold stocks on their promotion to the larger FTSE 100 index which means SCP offers more pure exposure to the exciting mid-cap opportunities within the UK (see Portfolio). As such, we believe SCP offers a diverse range of exposures, particularly lower down the mid-cap market which may provide greater upside potential.

The managers have demonstrated that much of their long-term outperformance has been driven by stock selection which lends support to the belief that the success of SCP is a result of the manager skill rather than simple market beta and offers greater return potential than the index (see Performance).

Furthermore, the managers argue they have a greater focus on valuations which has contributed to their outperformance of their peers across 2022 as the market rotation impacted growth stocks. If the impact of inflation and interest rates persist in 2023, we believe SCP could be considered in a better place against more growth-exposed peers.

The managers have argued that mid-caps’ valuations are cheap when compared to their history of the past 20 years, and whilst we note they have recovered well in the short term, this could still be seen as an attractive entry point for long-term investors.




  • Strong outperformance of benchmark and sector over multiple time periods
  • Trust offers pure access to a diverse and dynamic index
  • Valuations remain arguably very cheap versus historic levels




  • Smaller companies are more exposed to economic headwinds
  • Gearing has been increased over the past five years which brings risks as well as performance potential
  • Managers sell a company on promotion to FTSE 100 which can limit upside potential


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