Artemis SmartGARP UK Equity Fund
Q3 2025 update
Source for all information: Artemis as at 29 September 2025, unless otherwise stated.
Let’s meet up in the year 2081
Rather than write a performance-focused quarterly review, I thought I would use a few charts to illustrate some powerful messages.
There is a tendency to think that having seen the SmartGARP funds do well, the party is over. Conversely, with US stocks still growing, the assumption is investors should keep giving them money. While I suspect that our funds will continue to beat their benchmarks going forward, I think there is a bigger play likely to unfold. Below I illustrate that our fund has a good chance of beating the US market by 50% over the next few years. Not only that, but the risks are skewed. This is not a prediction but rather an observation that the odds are stacked in our favour.
By way of background, we had a good quarter, with the fund up 9.3% compared with gains of 6.9% from the FTSE All Share. Over the past three years, the respective numbers are 83.1% and 50%. Likewise, since inception the fund is ahead of the index by 2.0 percentage points per annum, but such is the power of compounding that this adds up to 778.6% compared with 481.9%. The outperformance is not unrelated to us owning stocks that are valued cheaply yet deliver good growth.
| Three months | Six months | One year | Three years | Five years | |
|---|---|---|---|---|---|
| Artemis SmartGARP UK Equity Fund | 9.3% | 23.0% | 36.7% | 83.1% | 175.5% |
| FTSE All-Share TR | 6.9% | 11.6% | 16.2% | 50.0% | 84.1% |
| IA UK All Companies average | 3.0% | 10.7% | 9.2% | 40.2% | 57.0% |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis to 30 September 2025 for class I accumulation GBP. 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. Classes may have charges or a hedging approach different from those in the IA sector benchmark.
I believe that share prices ultimately follow fundamentals. As an example, in the past quarter our biggest winner was Just Group which got bid for at a 75% premium. It was a desperately cheap stock and a private equity company came to share our view.
Just Group's EPS (earnings per share) had been outgrowing the FTSE 350's, yet its P/E multiple was about a quarter of the market's. In situations like this, investors can ignore good value/reasonable growth for a certain amount of time, but ultimately someone else will see the opportunity.
However, it is not always about undervalued stocks. The UK’s largest company is AstraZeneca.
Over the past decade, AstraZeneca's EPS has been rising by about 4 to 5 percentage points per annum faster than the FTSE 350's. Unsurprisingly, it has outperformed the UK market and now trades at a premium. Over in America, however, there are proper growth stocks on offer.
Nvidia has been outgrowing AstraZeneca by about 50% per annum. Sure, the stock trades at twice the multiple of AstraZeneca but it only requires a couple of years' growth before the EPS catches up with the share price. It is perfectly understandable why such growth stocks are highly rated and delivering great returns for investors. Why would you rummage around the UK market when you have this kind of growth on offer in the USA?
When you look at the US equity market in aggregate versus its UK equivalent, the picture is similar (albeit less extreme).
Since the nadir in 2007, US equities have been delivering EPS growth that has been 5 percentage points per annum faster than those in the UK. Sure, the P/E multiple is at a 70% premium, but the EPS is still heading up and so investors are (to my surprise) prepared to give US stocks the benefit of the doubt. In effect, financial markets are guessing where the EPS relative is heading. If it keeps going up like this, the EPS would catch up the return relative in seven years’ time. This is quite a long way forward, but you can see why investors might think it is a waste of time buying UK stocks when so much growth is on offer across the pond.
Nevertheless, we have a UK fund that has been outperforming the UK market by 2.0 percentage points per annum over the past 23 years. We can plot the return and forecast EPS relative for our fund (after fees) versus the FTSE 350. Over the years, it would appear we have bought stocks that seem to outgrow the market by about 2 percentage points per annum. I don’t think this is random – I believe it is an outcome of our SmartGARP process – something that should be repeatable in the future.
Yes, the fund has had a good run over the years, but it is hardly surprising given the relative EPS growth. Is there any sign that we have lost our mojo? No.
Artemis SmartGARP UK Equity vs the US market
This is where the fun starts. Rather than looking at how our fund stacks up against the UK market, let's look at how it stacks up against the US.
Over the past 23 years, our fund’s EPS has underperformed the US stock market's by 0.1% percentage points per annum. However, let’s take the peak in the relative price in April 2007. Since then, the price has gone down by 4.9 percentage points per annum while the EPS has gone down by 1.6 percentage points per annum. The result is that the P/E of our fund is now about 40% of the US market's. On that basis, it will be another 56 years (2081) before the EPS line catches up with the price line. Seven years seemed like quite a long time to wait; 56 years seems ridiculous.
If anything, the EPS of our fund has been heading up recently. It was only a few years ago that value stocks in the UK and Europe looked mispriced (cheap and growing) within these markets. Value has worked within UK/Europe and investors think they have missed the party. Our stocks still look mispriced in a global context. Maybe it won’t be the EPS that heads down but the price relative that heads up. This is what has been happening across our SmartGARP funds versus their benchmarks over the past few years, and they may well start to outperform the US market, too. If the P/E multiple relative goes back to where it averaged in the first three years of the century, Artemis SmartGARP UK Equity would outperform the US market by more than 50%. Stranger things have happened.
Notes and references
Benchmarks: FTSE All-Share Index TR; A widely-used indicator of the performance of the UK stock market, in which the fund invests. IA UK All Companies NR; A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. These act as ‘comparator benchmarks’ against which the fund’s performance can be compared. Management of the fund is not restricted by these benchmarks.
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 SmartGARP UK Equity Fund
- 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.
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.
