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Schroder UK Smaller Companies Fund research update

Heather Ferguson | Wed 23 September 2015

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.

Rosemary Banyard and Andy Brough are two of the longest-serving managers in the UK Smaller Companies space, having co-managed the Schroder UK Smaller Companies Fund for the best part of the last 20 years.

Amid signs of slowing growth in China and uncertainty surrounding when interest rates will rise in the UK and US, the managers are taking a cautious approach. Their focus is on companies with low levels of competition, particularly those operating in industries where the demand for their products exceeds the supply.

Ted Baker fits within this definition and has been one of the fund's best-performing stocks over the year to date. The clothing retailer has increased sales by expanding overseas and improving their online offering. 4D Pharma, another key holding within the fund, has also performed well. Their treatments for IBS and paediatric Crohn's disease are due to start clinical trials which, if successful, could bode well for future cash flows.

The fund performed well until late 2011 but it has since performed broadly in line with the index. Since the managers both began running the fund in December 1998, the fund has returned 558.3% compared with 408.1% for the IA UK Smaller Companies sector and 237.1%* for the FTSE Small Cap (exc. Investment Trusts) Index. Although, please remember past performance is not a guide to the future.

Annual percentage growth
Sept 10 -
Sept 11
Sept 11 -
Sept 12
Sept 12 -
Sept 13
Sept 13 -
Sept 14
Sept 14 -
Sept 15
Schroder UK Smaller Companies (acc) 19.86% 10.19% 41.08% 11.43% 12.78%
IA UK Smaller Companies Index 17.52% 8.44% 31.72% 12.82% 9.11%

Past performance is not a guide to the future. *Source: Lipper IM 1 September 2015

The managers feel growth will continue to be low across Europe and China. They therefore expect an increase in mergers and acquisitions as firms look to eliminate the competition and benefit from the reduced savings that economies of scale often bring.

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Our view on this fund

The UK Smaller Companies sector is very competitive. Although Rosemary Banyard and Andy Brough have a long, solid track record in this higher-risk area, we believe there are currently other managers who produce more consistent returns over the long term. The fund therefore does not appear in our Wealth 150 list of favourite funds across the major sectors but we will inform investors if our views change.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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