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Merian UK Smaller Companies Inclusive - Class A - Income (GBP)

Sell:495.90p Buy:495.90p Change: 1.30p (0.26%)
Prices as at 25 September 2020
Change: 1.30p (0.26%)
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Prices as at 25 September 2020
Change: 1.30p (0.26%)
Prices as at 25 September 2020
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

Our view on this Fund

This fund does not feature on the Wealth Shortlist of funds our analysts believe have the potential to outperform their peers over the long term. This is not a recommendation to sell; however, if you are thinking of adding to your investments, we believe the Wealth Shortlist is a good place to start. View funds on the Wealth Shortlist »

Daniel Nickols combines his experience of selecting companies for their long-term growth potential with his views on the economy. He's done this to good effect and delivered excellent results for investors. The UK smaller companies sector is one where managers can really add value by finding companies many others may have missed. We think Nickols has done this. But there are other managers in which we have equal conviction, running funds with lower charges. That's why the fund doesn't feature on the Wealth 50 list of our favourite funds.

Our view on the sector

Smaller companies in the UK are among the most innovative and exciting around. They can be pioneers of an emerging industry, and adapt quickly to new opportunities. We think their long-term growth prospects are compelling. Some will blossom into the giants of tomorrow. But others will struggle or fail altogether, so they are higher risk. Unlike larger companies such as Tesco or Vodafone, which might have dozens of analysts poring over their accounts, smaller companies tend to be less researched. They might only have one or two analysts covering them which creates opportunities for eagle-eyed fund managers to spot hidden gems. Over the past decade, innovations such as the internet have allowed smaller companies to level the playing field with larger rivals. Even so, they tend to be more sensitive to the UK economy then larger companies so you should expect more ups and downs along the way. We think UK smaller companies could be a great addition to a diversified portfolio able to accept the increased volatility.

Performance Analysis

Since Nickols took over the fund in January 2004, he's beaten the benchmark by a long way. Our analysis suggests this is mainly down to his ability to select companies for their growth potential. His outperformance has been fairly consistent, with only two notable periods where he's fallen behind the benchmark: at the beginning of 2009 and at the end of 2018. This doesn't indicate how the fund will do in the future though.

Investment Philosophy

The manager believes the best long-term results can be achieved by combining stock-picking with consideration of the bigger economic picture. He thinks there are lots of opportunities in the UK smaller companies space where the market's not appreciated the true value of a company. Where that's combined with bright prospects, the manager believes the market will eventually recognise the true worth, though of course there are no guarantees.

Process and Portfolio Construction

Nickols invests in higher-risk smaller companies he thinks have excellent long-term growth potential. If a small company grows into a large one, he normally stays invested if he thinks it'll keep growing. That makes the average company in the portfolio bigger than some UK smaller companies funds.

Unlike many other managers in the sector, Nickols pays a lot of attention to what's going on in the economy. He uses his many years of experience to judge how he thinks this will filter down to company performance. That affects how and where he invests.

Most of the fund invests in companies with good rather than explosive growth potential. But it also includes companies considered higher-risk than normal with more aggressive expectations. Nickols normally invests in fewer companies than many other managers in the sector. But he invests in enough so that the risk of one or two doing badly shouldn't impact performance too much.

This fund also has some exposure to unquoted companies, which aren't yet listed on a stock market. The manager only invests in those that have already achieved a degree of success and are generating revenues, but this exposure does add risk. More recently, Merian has reached the stage where it would rather hold fewer unquoted companies in its open-ended funds. Therefore we expect the amount of unquoted companies in this fund to reduce and in time be sold completely.

question mark Manager Track Record Based on HL Quantitative Research

  • Merian UK Smaller Companies A Acc
  • FTSE Small Cap (X It) TR

Fund Track Record

25/09/15 to 25/09/16 25/09/16 to 25/09/17 25/09/17 to 25/09/18 25/09/18 to 25/09/19 25/09/19 to 25/09/20
Annual return 13.61% 32.93% 7.79% -11.05% 4.40%

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Fund Management Group Comment

Merian Global Investors was created in 2018 when the team at Old Mutual Global Investors broke away from the wider Old Mutual business. The company offers funds investing across the globe - from the UK and Europe to Asia and the US. None of the managers are constrained by a 'house view'. Instead they're given the flexibility to invest their funds wherever they find the best opportunities.

Information about the fund

Fund manager biography

manager photo
Manager Name: Daniel Nickols
Manager start date: 31 January 2004
Manager located in: London

Daniel Nickols joined MGIS in 2001 following the integration of Gerrard Investment Funds, prior to which he worked at Gerrard for two years.  He was appointed to his current role in January 2009.  His involvement with smaller companies began in September 1995, when he joined Albert E Sharp as a specialist salesman.  He switched from the sell side to the buy side in May 1997, working on the Albert E Sharp Smaller Companies Fund.  After graduating from Cambridge University in 1992 with an BA in Modern and Medieval Languages, he joined Deloitte & Touche, before moving to the European equities division of Morgan Stanley in June 1994.  He is an Associate of the Institute of Investment Management & Research.

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used. Benchmark data provided subject to this disclaimer.
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account