Edinburgh Worldwide – The output of innovation is alive and well

At a time when interest rates have risen in response to rising inflation, Edinburgh Worldwide (EWI) – with its focus on small cap global growth stocks – has given up a significant portion of its previous outperformance. The trust finds itself in a somewhat unusual position in that it has moved to a significant discount, about a 20% discount versus a five-year average of 2.5%. This comes at a time when global small cap stocks are trading at a modest discount to global equities, rather than their usual significant premium, based on longer-term averages.

While acknowledging that there may be some volatility ahead, the current discount could offer an entry point for a longer-term investor who is prepared to look through the short-term market noise. Ultimately, EWI is backing companies that its managers believe are disrupting industries to become leaders in their fields, unlocking significant value in the process. Its managers expect these portfolio companies to prosper irrespective of where we are in the economic cycle, and its discussions with company management tell it that “The output of innovation is alive and well”.