Artemis US Smaller Companies: May 2026 fund update

• Cormac Weldon has over 20 years’ experience of investing in the US

• He uses a clear, disciplined investment approach, which has served the fund well since launch

• We think this is a great way to invest in smaller companies with high growth potential in one of the world’s most innovative markets

• This fund features on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

We think the Artemis US Smaller Companies fund is a great way to invest in smaller companies with high growth potential in the US, one of the world's most innovative markets.

The fund aims to deliver long-term growth by investing in smaller companies based in the US. Smaller businesses are often among the most innovative and offer lots of growth potential, but they're higher risk than their larger counterparts.

We think the fund could add diversification to a portfolio with little invested in the US or could work well alongside other US funds focused on larger companies.

Manager

Cormac Weldon leads the US equity team at Artemis and has been manager of the fund since launch in October 2014. He joined the company from Columbia Threadneedle, where he was head of the North America team. He has plenty of experience investing in the US market, having managed funds investing there since 2001, and is a manager we rate highly.[AM1]

Weldon has the support of a high-quality team of investors around him, too, with five dedicated US investors at his disposal. Many of the team moved across from Columbia Threadneedle to join Artemis at the same time as Weldon, so they’ve worked together for a long time. They all follow the same investment process and are specialists in their respective sectors.

In September 2022, Olivia Micklem became co-manager of the fund. Micklem also [HC2] has plenty of experience, having joined Columbia Threadneedle as a graduate in 2007, before moving to the US Equity team in 2011. Micklem followed Weldon to Artemis in 2014 as an analyst, covering the Consumer Staples and Healthcare sectors. While Micklem is now a co-manager, the fund continues to be run in the same way, with Weldon remaining the final decision maker.[AM3]

Process

Weldon looks to invest in companies that he thinks have a 2:1 ratio of upside potential versus downside risk from the current market price. He does this by identifying what really drives the company. His team then spend time modelling what could happen to its profitability and growth over time, as they are likely to have the greatest impact on its valuation in the future. He then builds the portfolio with these ratios in mind, with the companies where upside potential significantly outweighs the downside risk likely to justify larger position sizes in the fund.

Regularly meeting company management is important to Weldon and his team. They think this is one of the best ways to deepen their understanding of the business model and assess the quality of the management team.

Weldon also considers how the US economy is performing to identify sectors that are benefiting from trends, as well as the areas that are finding things tough. This can help him decide how much to invest in a sector, although he won't invest 10% more or less than its weight in the Russell 2000 index. Investments in individual companies are also limited, so their weight in the fund isn’t too different from the benchmark. In practice, though, the fund and benchmark will look different as the fund only invests in 40 to 60 companies out of the thousands that make up the index. Weldon believes the sector and stock level limits provide ample freedom to reflect his convictions while ensuring a good balance of investments. Holding a smaller number of investments can increase risk, as each has a larger impact on performance.

Recently, Weldon made some adjustments to the fund. He believes the market has been very concentrated in AI names and is conscious that valuations are now high. He has, therefore, looked at other parts of the market that look attractive. This has meant investing more in some more economically sensitive, or ‘cyclical’ companies like transport company J.B. Hunt, as well as companies that could potentially recover such as financial company Evercore.[AM4]

On the other hand, Weldon also sold a number of companies. This includes, retail company BJ’s Wholesale Club, regional bank Western Alliance Bancorp and footwear manufacturer Wolverine World Wide.[AM5]

Culture

Weldon is a partner at Artemis, which is a private company. We think this structure is a good thing for investors, as both manager and firm are focused on the long term and can run funds without distractions from short-term shareholder demands. Artemis provides an attractive environment for fund managers, allowing them the freedom to run money how they see fit without imposing a ‘house view’ on them. It’s also a collegiate atmosphere, with managers supporting and challenging each other. Fund managers at Artemis are required to invest their own money into their funds, so they benefit when their investors do.

ESG integration

Investment teams across Artemis are encouraged to think for themselves and invest according to their own style, so approaches to Environmental, Social and Governance (ESG) integration across the firm vary. Recent meetings with the Artemis teams we back on the Wealth Shortlist suggest that ESG is an important factor.

Artemis has a firm-wide policy to support the aims of international conventions on cluster munitions and antipersonnel mines; and, therefore, the firm will not knowingly invest in companies which produce these weapons. The firm also avoids companies involved in biological/chemical weapons, blinding laser weapons, incendiary weapons, weapons that produce nondetectable fragments, and depleted uranium, as well as companies with a tie to nuclear weapons in countries not included in the Treaty on the Non-Proliferation of Nuclear Weapons. Companies that grow or sell cannabis are also avoided.

Artemis votes on all their holdings, unless restricted from doing so, and fund managers engage with firms to develop their understanding, raise issues with management and monitor subsequent developments. The firm provides engagement case studies and other information about its engagement and voting efforts in an annual Stewardship report. Artemis also provides a monthly voting summary, which includes rationales for votes against management and abstentions. Stewardship activity is carried out in line with the firm’s comprehensive voting and engagement policies.

Investors should note that this fund is one of the highest ESG risk profiles and is one of most carbon intense funds under research coverage. The companies within the fund could, therefore, face increased regulatory scrutiny, reputational damage, and operational challenges, potentially impacting the fund's future performance. They may also face higher costs associated with carbon emissions management and potential carbon pricing mechanisms, potentially impacting the fund’s performance.[AM7]

It’s important to remember that although the fund managers integrate ESG into the process and believe it can be a long-term risk to a company, this isn’t a fund focused on sustainability.

Cost

This fund has an ongoing annual charge of 0.86%, but we've secured HL clients an ongoing saving of 0.09%. This means that you pay a net ongoing charge of 0.77%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP.

Our platform charge of up to 0.35% per year also applies, except in the HL Junior ISA, where no platform charge applies.

We recently made some changes to the amount clients pay to invest with us. Find out more about these changes

Performance

Since joining Artemis to launch the fund in October 2014, Weldon has delivered attractive returns for investors, gaining 369.04%*, compared with 245.17% for the IA North America Smaller Companies sector average.[AM9]

Our analysis suggests that Weldon’s astute stock picking has added value for the fund particularly in the Industrials sector[AM10] . We think his disciplined application of his process has played an important role in this. Please remember that past performance isn't a guide to the future.

Over the last 12 months, the fund has outperformed the IA North America Smaller Companies sector average. It delivered a return of 48.21% compared to 33.09% of the IA North America Smaller Companies sector average.[AM11]

The fund’s investments in AI infrastructure-related companies have been some of its strongest performers over the last 12 months[AM12] . These smaller companies represent the ‘picks and shovels’ of the AI buildout, providing the essential tools and infrastructure that supports the AI ecosystem.

The largest contributor to performance was energy company Bloom Energy. Bloom manufactures fuel cells that generate electricity, which can be used to support AI data centres. As demand for AI data centres has increased, so, too, has demand for its products. On a similar theme, AI hardware companies Applied Optoelectronics and Coherent Corp have also benefited from rising demand, as the expansion of data centre infrastructure continues to drive the need for their products.[AM13]

On the other hand, defence company Axon Enterprise was the largest detractor from performance over the last 12 months. Fitness and gym company Planet Fitness also underperformed, as they had to roll back price increases due to a decline in memberships. E-commerce brand Wayfair also performed poorly over the last 12 months.[AM14]

Over the longer term, funds managed by Weldon have tended to hold up better than the broader market when it falls. It has also typically risen faster than the market when it rises as well.[AM15]

This performance profile has led to good long-term returns for investors, and we continue to believe that Weldon is a talented manager. All investments fall as well as rise in value, so investors could get back less than they invest.