Artemis UK Smaller Companies Fund

The Artemis UK Smaller Companies Fund aims to harness the growth potential of smaller companies. Through detailed financial research and company meetings, the managers identify between 60 and 90 growing businesses that they believe will produce strong investment returns over the longer term.

However, the value of the investments selected by the managers may fall as well as rise with movements in stockmarkets or owing to diverse factors specific to individual companies. This could mean investors may not get back the amount they originally invested. Smaller companies carry more risk than larger, more established companies. Information for determining the value of owning them – and the risks that entails – can be harder to obtain.

• Meeting management: managers Mark Niznik and William Tamworth hold between 300 and 500 meetings with companies every year. They believe that a deep understanding of the companies and their management teams is imperative for successful investing.
• A focus on risk: a key risk of investing in smaller companies is that they are traded less on the stockmarket and may be harder to sell at times. To help counter this, the managers diversify the portfolio across companies by size and industry.
• And on liquidity: a key risk of investing in smaller companies is that they may be harder to sell at times than might be the case with larger, more established and better-known companies. This ‘liquidity’ risk is something that the managers give much attention to, as this article explains.
• A distinctive portfolio: a flexible approach to portfolio construction, where the fund’s largest holdings are those in which the managers have the highest degree of conviction, not necessarily those companies that are largest in size.
• ESG integration: the managers believe that good analysis of environmental, social and governance factors offers significant scope for better returns (alpha) within the small-cap market. Disclosures by companies in the fund’s investment universe can often be poor, so this is an area they engage on. They maintain an internal ESG monitoring list for all stocks in the portfolio.