Artemis SmartGARP Global Smaller Companies Fund
Q2 2026 update
Source for all information: Artemis as at 30 June 2026, unless otherwise stated.
- The fund returned 5.7% in the quarter versus 14.1% for the MSCI AC World Small Cap index
- Contributors included Enova International, NGK Corp and TD Synnex
- Detractors included SanDisk (not owned), CF Industries and Tianshan Aluminium
Performance
The Artemis SmartGARP Global Smaller Companies Fund returned 5.7% during the quarter, compared with 14.1% for its benchmark. In a quarter when artificial intelligence remained the dominant investment theme, its underweight to technology was unhelpful. Weaker performance from some of its holdings in materials and energy also hurt. While this short-term underperformance is disappointing, we do not believe it changes the investment case for our strategy. The market continues to reward a relatively narrow group of expensive and, in many cases, unprofitable companies. By contrast, our fund is biased towards profitable businesses with attractive valuations and improving earnings.
We remain patient and believe the current environment provides a good opportunity for our disciplined stock-selection approach. Financials, industrials and healthcare all began to contribute to market returns over the quarter, suggesting market leadership may be starting to widen.
| Three months | Six months | Since launch | |
|---|---|---|---|
| Artemis SmartGARP Global Smaller Companies I Acc GBP | 5.7% | 12.9% | 18.8% |
| MSCI AC World Small Cap NR GBP | 14.1% | 17.7% | 21.3% |
Past performance is not a guide to the future. Source: Lipper Limited/Artemis, from 10 October 2025 to 30 June 2026 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.
Contributors/detractors
At the stock level, the largest relative detractor was our underweight position in SanDisk, which we do not own. Holdings including Tianshan Aluminium, CF Industries and Türkiye Petrol also weakened as geopolitical tensions weighed on commodity-related shares. Positive contributions came from NGK Corp, TD Synnex, Enova International and PROG Holdings.
Transactions and positioning
During the quarter, we continued to recycle capital towards companies with improving earnings momentum while reducing exposure to businesses where earnings expectations had begun to weaken.
New positions included Topco Scientific (precision materials), flatexDEGIRO (online brokerage), Indivior (pharmaceutical) and Andersons (agribusiness), where we identified improving fundamentals alongside attractive valuations. We also added to our existing holdings in Enova International, Wistron, Virtu Financial and ANI Pharmaceuticals as our conviction strengthened.
To fund these purchases, we exited Public Power Corporation, Life Healthcare Group and Match Group after their earnings revisions deteriorated and we identified more attractive opportunities elsewhere.
The fund remains overweight in materials, energy and banks, while technology and healthcare are its largest underweights. Geographically, we continue to favour China, Taiwan, Brazil and the UK, while the US remains our largest underweight. The portfolio trades on 9.1x earnings, a 41% discount to the benchmark, while offering stronger earnings revisions, a higher dividend yield and higher returns on equity. We believe these characteristics provide an attractive combination of value and quality.
Why global small caps?
The outlook for global smaller companies remains encouraging. After years of strong returns from large-cap equities, particularly US mega caps, the valuation gap between large and small companies has widened to historically unusual levels. As investors have concentrated on a narrow group of stocks, many high-quality smaller companies have been overlooked.
History suggests that starting valuations are an important driver of long-term returns. While relative performance has been volatile in recent months, global small caps continue to trade at attractive valuations compared with large-cap equities, providing a supportive backdrop for long-term investors.
We believe the opportunity for this fund is even greater. It trades on a 41% discount to the MSCI Global Small-Cap index and a 48% discount to the MSCI ACWI, while analysts' profit forecasts continue to increase at a faster pace than either benchmark.
| P/E | Analyst revisions | ROE | Dividend yield | |
|---|---|---|---|---|
| Artemis SmartGARP Global Smaller Companies | 9.1x | 7.3% | 13.4% | 3.7% |
| MSCI ACWI Small Cap | 15.6x | 4.4% | 10.8% | 1.8% |
| MSCI ACWI | 17.5x | 4.9% | 15.4% | 1.7% |
Importantly, we are not simply investing in inexpensive companies. The broader small-cap universe contains many unprofitable businesses. Our firm focus remains on established companies with strong cash generation, attractive valuations and improving fundamentals.
Outlook
We recognise that periods of underperformance can be frustrating. They are also an inevitable part of active investing. Our response is not to change course in pursuit of whatever the market happens to favour next, but to continue applying the disciplined SmartGARP process that has been shown to deliver outperformance over time.
The current environment looks attractive for active global small-cap investing. The portfolio combines a substantial valuation discount with stronger earnings revisions, a higher dividend yield and attractive returns on equity. These characteristics have been achieved while maintaining our focus on profitable, cash-generative businesses rather than on market leaders.
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 Global Smaller Companies 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.
- Emerging markets risk Compared to more established economies, investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles, less governed standards or from economic or political instability. Under certain market conditions assets may be difficult to sell.
- 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.
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.
