Artemis Funds (Lux) – US Smaller Companies
Q3 2025 update
Source for all information: Artemis as at 30 September 2025, unless otherwise stated.
Artemis Funds (Lux) – US Smaller Companies is an actively managed fund. The fund's objective is to increase the value of shareholders’ investments primarily through capital growth. The fund invests principally in equities of smaller companies that are listed on a recognised stock exchange in the USA. Typically, these are companies with a market capitalisation of less than $10bn at the time of purchase.
Review of the quarter to 30 September 2025
The third quarter of 2025 was another one of contrasts. Global markets advanced despite an unhelpful policy backdrop, with investors choosing to focus on moderating inflation and resilient growth. Meanwhile, the Federal Reserve cut interest rates to 4.00-4.25% after a run of weaker employment data. This shift provided a tailwind for equities, helping the large-cap S&P 500 index and the small-cap Russell 2000. At the same time, long-end Treasury yields were broadly stable.
Elsewhere, gold rallied 17% to a new record on safe-haven demand, while the dollar stabilised after a torrid first half of the year.
The US administration extended and expanded tariffs, though new trade deals with the EU and Japan tempered fears of a wider escalation. Despite these crosscurrents, market tone remained constructive, supported by easing policy and better visibility on growth.
While risks persist, most notably around fiscal sustainability and the inflationary impact of tariffs, the broader picture remains one of resilience, with the US continuing to demonstrate relative economic strength.
The Russell 2000 index had a strong quarter, making 12.3% compared with 8.0% from the S&P 500. Cyclical sectors such as basic materials, energy and industrials drove returns, while consumer staples and financials lagged behind.
With a return of 11.8%, the Artemis (Lux) Smaller Companies Fund underperformed its Russell 2000 benchmark, but outperformed its US Small-Cap Equity sector average, which made 8.6%.
| Three months | Six months | One year | Three years | Five years | |
| Artemis Funds (Lux) – US Smaller Companies | 11.8% | 28.0% | 13.6% | 61.9% | 59.7% |
| Russell 2000 NTR | 12.3% | 21.7% | 10.3% | 52.2% | 72.0% |
| US Small-Cap Equity average | 8.6% | 21.5% | 9.4% | 50.9% | 58.5% |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis as at 30 September 2025 for class I Acc USD. As at 6 Aug 24 the benchmark changed to Russell 2000 NTR (Standard). Returns up to 6 Aug 24 reflect those of the Russell 2000 TR
Fund 10-year discrete performance
| YTD | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | |
| Artemis Funds (Lux) – US Smaller Companies | 7.7% | 23.2% | 18.9% | -28.7% | 17.3% | 28.6% | 30.7% | n/a | n/a | n/a | n/a |
| Russell 2000 NTR | 10.1% | 11.4% | 16.9% | -20.4% | 14.8% | 20.0% | 25.5% | n/a | n/a | n/a | n/a |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis as at 30 September 2025 for class I Acc USD. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. As at 6 Aug 24 the benchmark changed to Russell 2000 NTR (Standard). Returns up to 6 Aug 24 reflect those of the Russell 2000 TR.
Negatives
Water and wastewater manager Core & Main suffered following a poor quarter, missing consensus on a number of line items. Given the growth outlook has essentially moved flat for 2026, we decided to exit the position and recycle capital into other areas.
Shares in weapons and technology developer Axon fell back over the quarter following strong results but heightened expectations. Q2 2025 revenue rose 33% year-over-year on accelerating software and drone uptake, leading the company to raise full-year guidance. However, valuation sensitivity and execution risk, particularly around Taser 10 manufacturing constraints and elevated capex, limited upside. It remains an incredible business with a new growth driver in the form of AI integration into its current offering. There is also another vector tool launching drone-first responders, which will quickly arrive at the scene of 911 calls before providing an assessment of the situation to police.
Specialty insurer Palomar reported strong top-line and earnings growth yet there were some mixed signals about forward profitability. Its favourable reinsurance renewals and falling fronting costs underpinned margins, but there was some weakness in the growth of its commercial earthquake book. That said, it is displaying growth ahead of peers, a less risky financial profile and a strong underwriting track record.
Discount gym provider Planet Fitness's second-quarter earnings per share beat expectations yet persistent churn following the 'click-to-cancel' rollout and uncertainty over Black Card pricing weighed on sentiment. While franchise economics improved and the GLP-1 weight-loss trends could support incremental membership gains, investors are cautious about the timing and durability of recovery in member retention.
Earnings per share in barge operator Kirby rose on strong utilisation and double-digit contract repricing, but navigation delays and labour constraints limited upside. Elevated shipyard activity also moderated volume growth and management trimmed 2025 guidance. We sold out of the position on the more muted outlook.
Positives
Bloom Energy, the fuel-to-electricity converter, delivered another record quarter with 20% revenue growth and margin expansion to 26.7%. Meanwhile, management unveiled plans to double manufacturing capacity to 2GW by the end of 2026. Towards the end of July, it was announced Bloom is to provide power to Oracle Cloud Infrastructure data centres in the US.
Initially a Bitcoin miner, IREN has proved different from its peers. Rather than taking the standard capital-light approach, it has invested significantly in data centres, allowing it to lease compute capacity (a large cluster of Nvidia graphics processing units) to AI cloud-service providers. The energy used to power its data centres is 100% renewable, making it even more appealing to hyperscalers (the much larger data service centres) which have committed to becoming carbon neutral.
Industrial services provider Primoris reported Q2 2025 revenue up 21% year-on-year and net income up 70%, driven by robust energy and utilities activity. The company announced a dividend and a growing, diversified backlog across renewables and infrastructure. It also confirmed that most business lines are accelerating faster than expected.
Memory chip business Western Digital benefited from the data-storage cycle turning decisively upwards. Revenue of $2.6bn was up 30% year-over-year and gross margins expanded to 41%, buoyed by strong demand from AI-servers. The sustained pick-up in orders allowed the company to increase prices on all of its hard disk drives.
Comfort Systems, which supplies high-skilled labour for building systems, delivered another record quarter, with revenue up 20% and earnings per share (EPS) surging 75%. The acquisition of Right Way Plumbing and double-digit service growth supported diversification.
Purchases
We topped up Axon on weakness over the quarter. We also added to regional bank Western Alliance, investment bank Evercore and building materials supplier TopBuild, all of which should benefit from falling interest rates. Finally, we added to Quest Diagnostics, the medical laboratory company.
Sales
We sold regional bank Pinnacle Financial Partners and reduced our exposure to Mirion Technologies (a provider of radiation monitoring systems), Comfort Systems and Bloom Energy on strong performance.
Outlook
As we enter the last quarter, there are tailwinds to US equities that lead us to be constructive on the outlook. The consumer remains healthy, Donald Trump’s One Big Beautiful Bill Act should begin to have an impact and a more supportive monetary environment should help sectors that have struggled under higher rates. There is also continued momentum in spending around AI with very little sign of let-up. We remain vigilant against overexuberance in the market and are moving capital towards those areas where we see the most attractive risk/reward trade-off. This discipline should stand us in good stead as we close out the year.
Notes and references
Benchmark: Russell 2000 NTR; the benchmark is a point of reference against which the performance of the fund may be measured. Management of the fund is not restricted by this benchmark. The deviation from the benchmark may be significant and the portfolio of the fund may at times bear little or no resemblance to its benchmark. As at 6 Aug 24 the benchmark changed to Russell 2000 NTR (Standard). Returns up to 6 Aug 24 reflect those of the Russell 2000 TR.
FOR PROFESSIONAL INVESTORS AND/OR QUALIFIED INVESTORS AND/OR FINANCIAL INTERMEDIARIES ONLY. NOT FOR USE WITH OR BY PRIVATE INVESTORS.
CAPITAL AT RISK. All financial investments involve taking risk and the value of your investment may go down as well as up. This means your investment is not guaranteed and you may not get back as much as you put in. Any income from the investment is also likely to vary and cannot be guaranteed.
This is a marketing communication. Before making any final investment decisions, and to understand the investment risks involved, refer to the fund prospectus (or in the case of investment trusts, Investor Disclosure Document and Articles of Association), available in English, and KIID/KID, available in English and in your local language depending on local country registration, available in the literature library.
Risks specific to Artemis Funds (Lux) – US Smaller Companies
- Market volatility risk The value of the fund and any income from it can fall or rise because of movements in stockmarkets, currencies and interest rates, each of which can move irrationally and be affected unpredictably by diverse factors, including political and economic events.
- Currency risk The fund’s assets may be priced in currencies other than the fund base currency. Changes in currency exchange rates can therefore affect the fund's value.
- Charges from capital risk Where charges are taken wholly or partly out of a fund's capital, distributable income may be increased at the expense of capital, which may constrain or erode capital growth.
- Smaller companies risk Investing in small companies can involve more risk than investing in larger, more established companies. Shares in smaller companies may not be as easy to sell, which can cause difficulty in valuing those shares.
- ESG risk The fund may select, sell or exclude investments based on ESG criteria; this may lead to the fund underperforming the broader market or other funds that do not apply ESG criteria. If sold based on ESG criteria rather than solely on financial considerations, the price obtained might be lower than that which could have been obtained had the sale not been required.
Important information
The intention of Artemis’ ‘investment insights’ articles is to present objective news, information, data and guidance on finance topics drawn from a diverse collection of sources. Content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by Artemis or any third-party. Potential investors should consider the need for independent financial advice. Any research or analysis has been procured by Artemis for its own use and may be acted on in that connection. The contents of articles are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current opinions, expectations and projections. Articles are provided to you only incidentally, and any opinions expressed are subject to change without notice. The source for all data is Artemis, unless stated otherwise. The value of an investment, and any income from it, can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.
