3 Smaller Company Funds

Many equity indices have fared poorly so far this year - but the FTSE 250 is up 6%. Here are the best small and mid cap funds to take advantage of the rally

Emma Wall 3 March, 2014 | 4:45PM
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Two themes likely to prevail in the UK equity market as we head through the year are politics and M&A, according to Martin Cholwill manager of the Royal London UK Equity Income Fund. Investors looking to profit from these phenomena better scoop up some small cap exposure – as it’s smaller companies that are targets for M&A and indeed smaller companies that feel the brunt of policital and economic developments as they tend to be more domestically focussed.

Read on for the top rated smaller company funds as determined by Morningstar anaysts.

Artemis UK Smaller Companies

This Morningstar analyst Gold Rated fund has not performed brilliantly in the recent past, but analyst Chetan Modi retains his conviction about Artemis UK Smaller Companies. The fund had a difficult year in 2012 while 2013 thus far has also been difficult as the fund trails its average peer by a significant margin. One of the reasons for the underperformance is that the fund’s typically higher exposure to micro-cap stocks has been a headwind, particularly in 2012. Despite the recent underperformance, our conviction in the manager and his consistent application of a robust strategy remains. Niznik focuses on high-quality companies that demonstrate resilient business models.

Old Mutual UK Smaller Companies

This Gold Rated fund is a strong offering within the competitive small-cap category. Analyst Simon Molika said the fund benefits from the manager’s pragmatic and flexible investment approach with no particular style bias.

After poor relative performance in 2009, Nickols has delivered better returns and outperformed the Morningstar peer group over 2010 and 2012. Over his tenure to 28 Feb 2013, Nickols has returned over 15% per annum, which is significantly higher than both the fund’s benchmark and Morningstar peer group average. The manager’s success has come from a strong mix of top-down and bottom-up influences. 

„All told, we think this is an excellent small-cap offering with a proven manager who benefits from strong support,“ concluded Molika.

Standard Life UK Smaller Companies

This is also a Gold Rated smaller companies fund. Analyst Ruli Viljoen says a key strength of this fund is manager Harry Nimmo, an experienced practitioner who has invested through a variety of market cycles and remained true to his discipline throughout.

„Nimmo has run the fund since launch in 1997 and heads the dedicated small-cap unit comprising three members, who average 20 years' experience,“ she said.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Artemis UK Smaller Companies R Acc20.45 GBP0.38Rating
ASI UK Smaller Companies R Acc1,103.01 GBP0.37Rating
Jupiter UK Smaller Companies L GBP Acc6.60 GBP0.04Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar