Marlborough Nano-Cap Growth - small companies, big opportunities

Dominic Rowles | Wed 14 March 2018

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• Giles Hargreave and Guy Feld invest in some of the UK's smallest companies
• The fund is currently biased towards businesses in the technology sector
• We hold the managers and their team in high regard and the fund retains its place on the Wealth 150+

Our View

Smaller companies are often under-researched compared to their larger counterparts. This means investors can often find overlooked opportunities if they are willing to scratch below the surface.

We believe exposure to this higher-risk area is best achieved by investing in a fund with an experienced manager at the helm.

They don’t come much more experienced than Giles Hargreave. His career spans four decades and he benefits from the support of co-manager Guy Feld and the broader smaller companies investment team at Marlborough. We regard this team as one of the best in the UK Smaller Companies sector.

Of course, not every small company is destined for success. Some will lose money or fail altogether and some volatility should be expected when investing in smaller companies. We believe this fund could reward patient, long-term investors and it retains its place on the Wealth 150+ list of our favourite funds in the major sectors.

How has the fund performed?

The fund performed better than the broader UK smaller companies market over both the short and longer term, though there are no guarantees this performance will continue. Our analysis suggests this is a result of the managers' ability to consistently select companies with superior growth prospects. Recent performance was boosted by an investment in corporate advisory business K3 Capital, which rose more than 45% after releasing an impressive set of results.

Past performance is not a guide to the future. Source: Lipper IM to 28/02/2018.

*Full year performance data is unavailable.

How is the fund positioned?

The managers recently sold a number of investments following a period of strong performance. This included AB dynamics, a producer of testing products used in the motor trade, and video game maker Frontier Developments.

The proceeds were invested in companies they believe offer superior growth prospects. For example, a new investment in Bioquell, a decontamination equipment manufacturer, was added to the fund. They also added to an existing investment in alternative energy business Ilika.

The fund is biased towards businesses in the technology industry and the managers believe this is a sector that could significantly boost the fund’s performance in the coming years, although there are no guarantees.

Company in focus: Blue Prism

Blue Prism is a robotic process automation company. It aims to help other companies make cost savings by creating software to carry out repetitive tasks.

The managers bought shares in Blue Prism when it listed on the stock market in March 2016 and after meeting the company’s senior management team several times. The company’s shares have since risen significantly as other investors have realised the number of applications of the company’s software.

Manager's outlook

Most global stock markets have been volatile this year following an extended period of strong performance. That said, periods of share price weakness give the managers the opportunity to add to their favourite investments at lower share prices, which could be beneficial for the fund’s future performance. The managers believe there are plenty of attractive opportunities within the UK market, and we think they are well placed to take advantage of them.

Please read the Key Features/ Key Investor Information in addition to the information above.

Find out more about this fund including how to invest