Amati UK Listed Smaller Companies: April 2025 fund update

• Amati’s co-founder, Dr Paul Jourdan, has been investing in smaller companies for over two decades

• The collaborative approach aims to leave no stone unturned in the hunt for smaller UK companies with lots of growth potential

• Long term performance is strong, but has been weaker in recent years with the fund underperforming the IA UK Smaller Companies sector average in each of the last four years

• The fund was recently removed from the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Amati UK Listed Smaller Companies fund aims to achieve long-term growth by investing in the smaller parts of the UK stock market. Companies of this size are often overlooked by analysts, meaning there are plenty of opportunities for investors prepared to scratch below the surface. The fund could add diversification to the UK portion of a more adventurous portfolio, or one focused on larger, more established businesses. Its growth focus could also complement other investments in out-of-favour value companies.

We've recently taken the decision to remove the Amati UK Listed Smaller Companies fund from the Wealth Shortlist following a sustained and significant fall in the level of assets managed by the business. You can read more in our fund notification.

Manager

The fund is managed by Dr Paul Jourdan and Scott McKenzie using a collaborative approach which enables them to have eyes in all corners of the market and leave no stone unturned.

Dr Paul Jourdan co-founded Amati Global Investors in 2010 and was initially the sole manager. His fund management career began in 1998 and he’s since built up a wealth of experience analysing companies listed both in the UK and around the world. Jourdan is also the chief executive of Amati Global Investors.

Scott McKenzie joined Amati in 2021 from Saracen Fund Managers and has over 25 years’ experience managing UK equity portfolios.

The managers are supported by analyst Dr Gareth Blades, who joined in 2019. His academic and life sciences background means he’s particularly involved in researching healthcare companies.

Gregor Paterson joined the business in July 2024 and has over two decades of experience working in the UK smaller companies space, both as an analyst and a corporate broker.

At the end of March 2025, experienced co-manager David Stevenson retired from his role at Amati. He will continue to support the business as a Director.

Process

The team’s process centres around detailed company research, and they invest the fund differently to the benchmark. They look for companies with the potential to grow faster than their competitors, usually through carving out a niche in a growing market or disrupting the traditional way of doings things. These tend to be high quality, financially robust companies with talented management teams. They avoid those that are speculative, highly indebted, or lack the edge to compete with larger, better resourced businesses.

This analysis whittles a universe of around 1,000 companies to a final portfolio of currently 51 holdings. They invest where the company share prices look attractive when compared with what they believe are the growth prospects. The team invest with the long term in mind. They start by investing 1-2% in each company and, if desired, build this over time to a maximum of 5%. Investments that exceed that size are trimmed. Other factors such as poor governance, a fading outlook or finding a better alternative will also trigger a sale.

In 2024, the managers made some changes to how the fund is constructed in response to a period of poor performance. This included investing less of the fund in the very smallest listed companies in the UK, reducing the fund’s exposure to some themes, reorganising stock coverage and making the portfolio flatter by reducing some top position sizes.

The managers added some new positions to the fund in 2024. These included holiday provider Jet2, utility provider TelecomPlus and fund manager Pollen Street.

Culture

Amati Global Investors, the business behind the fund, specialises in investing in small-to-medium-sized UK-listed companies. The business is majority-owned by its employees, and all staff are encouraged to invest in it. This means the managers and staff have their interests aligned with those of the business as a whole and investors.

ESG Integration

Amati’s fund managers consider a number of ESG-related issues in their investment process, including issues arising from supply chains, climate change and contamination, unequivocal social negatives such as profiting from addiction or forced labour, board membership, remuneration, conflicts of interest (such as related party transactions), business leadership and culture.

The company also adopts a Clean Trade approach, which means avoiding companies that support the most oppressive regimes and engaging positively with those that uphold Article 1 of the International Covenants on Civil and Political Rights, particularly in relation to the extraction of natural resources.

Amati fund managers and analysts actively engage with the companies they invest in, and the team uses all votes. A quarterly voting record is published to the firm’s website, although there is little in the way of rationale.

Cost

The fund is available for an annual ongoing charge of 0.86%. The HL platform fee of up to 0.45% per year also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

The fund’s long-term performance record is strong with the fund significantly outperforming its benchmark since Paul Jordan became manager. However, it has been weaker in recent years with the fund underperforming the IA UK Smaller Companies sector average in each of the last four years.

Over the last 12 months, the fund has delivered a return to investors of -5.18%*, falling by more than the -2.89% average return from the IA UK Smaller Companies peer group. Our analysis suggests that the fund’s investments in the technology sector in particular proved a headwind to its performance over the year. Having less invested in consumer defensive stocks was also challenging for performance. There were some positives though, with the fund’s investments in healthcare companies and economically cyclical businesses contributing to performance.

Investing in smaller companies is higher risk and investors should invest for the long term and be prepared for volatility along the way.