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Private investors

Artemis UK Smaller Companies Fund

All data as at 28 February 2017 except where specified
  • Summary
  • About the fund
  • Performance (class R)
  • Performance (class I)
  • Composition
  • Key facts
  • Investment insights
  • Literature
  • How to invest


The fund’s aims

The aim of the fund is to achieve long-term capital growth. The emphasis of the fund will be investment in smaller companies listed, quoted and/or traded in the UK and in smaller companies which are headquartered or have a significant part of their activities in the UK which are quoted on a regulated market outside the UK.

Current prices and yield
(class R)

As at noon, 22 March 2017
Bid price (acc units)1411.89p
Offer price (acc units)1512.69p
Historic yield (acc units)1.08%

Investment information
(class R)

Minimum lump sum investment£1,000
Ongoing charge (acc units)1.59%

The initial charge is currently waived. The ongoing charge includes the annual management charge of 1.5% and is shown as at the date of the Key Investor Information Document (KIID), where a full explanation of the fund's charges can be found.

Fund managers’ update

The fund’s strong start to 2017 continued in February. One of its best performers was RM Group, which provides resources for education. The market welcomed its acquisition of Connect’s educational supplies business. We own shares in both RM and Connect and view this as a good deal for both. RM will benefit from significant synergies in a market it knows well. The two businesses are geographically complementary and RM should enjoy substantial savings both from better buying power and from cutting costs where they are duplicated. This should more than offset the challenging conditions resulting from the government’s austerity measures. Connect, meanwhile, will free up capital from an area in which it had struggled to grow and allow it to invest in other parts of the business. RM financed the £56 million purchase mostly from the £40 million of cash they had on their balance sheet, resulting in a substantial (c.40%) upgrade to their earnings. The positive reaction of the share price (up 26% on the month) reminds us that the market often fails to fully value strong balance sheets until they are deployed. We will continue to exploit the opportunities this provides. There were few major losers in the month. Alliance Pharma was the biggest drag on returns despite a lack of any real news.

One of its best performers was RM Group, which provides resources for education.

We started two new holdings in February. One is an old favourite; the other we bought at IPO. We’ve long liked NCC’s software escrow business. This is where companies lodge the source code to ‘mission-critical’ software to provide a back-up should their software provider go bust. NCC receives a small insurance-like premium for holding the code. For NCC this business produces a stream of recurring cashflows and needs very little capital. Margins on this business are very high. This is close to an ideal investment for us. NCC’s main problem in recent years has been that it has made some terrible acquisitions in the ‘ethical hacking’ side of their business. After several recent profit warnings, we felt the shares had fallen to such a level that the current group valuation was justified by the escrow business alone. We started a modest holding.

We also took part in the IPO of pension consultant Xafinity. Its venture capitalist owner was looking to sell. The group advises trustees of defined benefit pension schemes and manages personal pension plans. The fees are recurring, require no capital and clients stay with them for a long time. At a multiple of 15x current year earnings or a 5% free cashflow yield, we felt this offered good value on a three-to-five-year view. These additions were funded by trimming some of our holdings that had done well such as Moneysupermarket.com, Telecom Plus and Severfield.

16 December 2016

Mark Niznik: Companies with pricing power …

The weaker pound has pushed up the price of imports. This will potentially put pressure on operating margins. Mark Niznik, a manager of the Artemis Smaller Companies Fund, talks about choosing companies that can pass on increased costs to their customers.

Value of £1,000 invested at launch to 28 February 2017

Value of £1,000 invested at launch to 28 February 2017

Data from 3 April 1998. Source Lipper Limited, accumulation units, bid to bid in sterling to 28 February 2017. All figures show total returns with dividends reinvested.

Asset allocation

Asset allocation

Source: Artemis as at 28 February 2017. Please note figures may not add up to 100% due to rounding.

Percentage growth (class R)

20162015201420132012
12 months to 31 December12.1%18.1%-4.9%30.2%21.6%
20172016201520142013
12 months to 28 February24.9%8.2%-5.2%23.7%20.9%
Please remember that past performance is not a guide to the future. Source: Lipper Limited, accumulation units, bid to bid in sterling. All figures show total returns with dividends reinvested.

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Mark Niznik: Companies with pricing power …





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About the fund

The Artemis UK Smaller Companies Fund harnesses the superior growth potential of smaller companies.

Its experienced manager uses fundamental research and company meetings to identify between 60 and 100 growing businesses that he believes will produce excellent risk-adjusted returns over the longer term.

  • Harnessing the power of smaller companies: research has shown that smaller companies tend to outperform their larger peers over the long term. The Artemis UK Smaller Companies Fund aims to exploit the ‘smaller companies effect’ by investing in stocks drawn from the bottom 10% of the UK market by value. 
  • Meeting management: manager Mark Niznik believes that a deep understanding of the companies is imperative for successful investing over the longer term. Company visits and careful assessment of management teams is a key element in his stock selection process.
  • Proven performer: launched in 1998, the Artemis UK Smaller Companies Fund has a strong long-term performance record. Mark Niznik has almost two decades’ experience of running smaller company funds.
  • A distinctive portfolio: a flexible approach to portfolio construction means that the fund’s largest holdings are those in which the manager has the highest degrees of conviction – not necessarily those that are largest in size.
  • Experience is key: Mark Niznik has many years experience in investing in smaller companies. Prior to joining Artemis in 2007, Mark analysed UK smaller companies as part of his role as a fund manager at Invesco Perpetual and then Standard Life.

Reasons to consider

The fund may be suitable for investors looking for:

  • the potential for capital growth
  • exposure to the growth potential of smaller companies
  • investment primarily in the UK
  • an experienced fund manager with a good performance record

Introducing the fund

Mark Niznik introduces the Artemis UK Smaller Companies Fund and outlines how he makes investment decisions.

Risk considerations

Before making an investment, investors should consider the level of risk they’re comfortable taking with their money.

  • This fund invests mostly in smaller and more recently established UK companies that the manager believes have strong growth potential.
  • These types of businesses can be more vulnerable to financial or operational failure. As a result, you should consider this a riskier investment than, for example, investing in long-established or larger companies.
  • Investors should also be aware that the usual risks of investing in stocks and shares apply – companies and stockmarkets can go through periods of turbulence and the value of your investment can go down.
  • This fund’s ‘SRRI’ risk rating, a measure of how volatile the fund’s performance has been over time, is currently 4, in a range of 1 (lower risk) to 7 (higher risk).

More detailed information on fund risks is included in the ‘risk warnings’ section below.

Risk warnings

To ensure you understand whether this fund is suitable for you, please read the Key Investor Information Document, which is available, along with the fund’s Prospectus, from artemis.co.uk.

The value of any investment, and any income from it, can rise and fall with movements in stockmarkets, currencies and interest rates. These can move irrationally and can be affected unpredictably by diverse factors, including political and economic events. This could mean that you won’t get back the amount you originally invested.

The fund’s past performance should not be considered a guide to future returns.

The fund may invest in the shares of small and medium-sized companies. Shares in smaller companies carry more risk than larger, more established companies because they are often more volatile and, under some circumstances, harder to sell. In addition, information for reliably determining the value of smaller companies – and the risks that owning them entails – can be harder to come by.

The historic yield reflects distribution payments declared by the fund over the previous year as a percentage of its mid-market unit price. It does not include any preliminary charge. Investors may be subject to tax on the distribution payments that they receive.

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any forward-looking statements are based on Artemis’ current expectations and projections and are subject to change without notice.

Issued by Artemis Fund Managers Ltd which is authorised and regulated by the Financial Conduct Authority.

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