The £73.13m Gartmore Fledgling investment trust, managed by Gervais Williams and Andrew Russell, has continued its outperformance of the FTSE All-Share as it has benefited from the strong returns of small and mid-caps. But the trust blamed unusually large dealing costs for underperforming the FTSE Fledgling index by 0.8% in the six months to December 31, 2003. In the second half of 2003, the net asset value of the trust increased by 34.6%, compared with a 12% gain in the FTSE All-Share. Over the past five years, the trust’s NAV has risen by 239.3%. In comparison, the Eaglet trust, managed by Peter Webb at Unicorn, has increased by 184%. The discount on the Gartmore Fledgling trust is 12.5%, which Nick Greenwood, head of investment trusts at iimia, describes as relatively tight. “Over the past 12 months, the discount has been as wide as 22%,” says Greenwood. “The trust has a strong following and there is not as much oversupply in this part of the market as there is among the generalists, which accounts for the relatively narrow discount. The trust obviously has a very impressive track record.” Williams is confident about the outlook for the fledgling sector because of the increase in takeovers and directors buying shares in their own companies. He says that in 2003 there were nearly three times as many director purchases as sales. Furthermore, nearly 11% of fledgling companies were bought out in 2003, a “significant” rise from the low in 2002. “This suggests a keen interest in the sector by corporates and venture capitalists,” says Williams.