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IFSL Marlborough Nano-Cap Growth: January 2022 fund update

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.
  • Guy Feld and Eustace Santa Barbara hunt for growth in the smallest nooks of the UK stock market
  • They follow the same investment philosophy and process established by their highly regarded predecessor, Giles Hargreave
  • Over the past year they’ve found some exciting new companies with long-term potential
  • This fund is not on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

IFSL Marlborough Nano-Cap Growth aims to deliver long-term growth by investing in some of the smallest companies in the UK, including those not listed on the London Stock Exchange. Companies of this size are often overlooked by other investors which can provide an opportunity for the managers to uncover hidden gems.

This fund could complement other investments focused on larger global or UK companies. Additionally, given its focus on companies with above average earnings growth - known as growth investing - it may work well alongside out-of-favour ‘value’ funds. Smaller companies are higher-risk, and we believe they should only form a small part of a well-diversified adventurous portfolio.

The fund is fairly large for the type of smaller companies it invests in. We don't want to see the fund grow significantly in size from here and that's why we're not currently considering it for the Wealth Shortlist.


Guy Feld has co-managed this fund since launch in 2013 and has decades’ worth of experience analysing small and medium-sized companies. He is also co-manager of the Marlborough Global Innovation fund, which predominantly invests in small and medium-sized technology companies from both the UK and US.

In January 2021, Eustace Santa Barbara was appointed co-manager alongside Feld. He has over 16 years’ experience in the industry and joined Marlborough in 2013 from Close Brothers.

Collectively, the duo also manage Marlborough UK Micro-Cap Growth and Marlborough Special Situations, which also focus on UK smaller companies, though not quite as small as those in this fund. Both managers have built up an impressive track record and we believe they leave few stones unturned when it comes to finding small companies with big potential.

They benefit from the support of an experienced team, several of whom also manage other UK focused funds. New additions include James Workman who joined the team in July 2021 from Rathbones where he covered small and medium-sized companies.

Veteran smaller companies’ investor Giles Hargreave also continues to serve as a sounding board for the managers but is no longer involved in day-to-day management.


Feld and Santa Barbara like companies that are easy to understand and have the potential to grow significantly over the long term. If successful, they will invest more in their favourite investments, or ‘run their winners’. Before any investment is made, they like to meet with company management and assess their quality.

The team also delves into a company’s financial strength. Healthy balance sheets are preferred, and they don’t like excessive levels of debt. They also consider companies that have a great product or service but appear to be ‘under-valued’ due to short-term issues. Maybe they've missed a profit target, or the management team made some unpopular decisions. Either way they must have the potential to turn things around.

The managers primarily focus on companies under £100m in size at the time of investment. Most of the fund’s investments are listed on the AIM index, a junior market of the London Stock Exchange, with the team finding most opportunity within the software and computer services sector.

To mitigate the risk involved with smaller companies, the managers run a diversified portfolio of around 140 companies. Historically the managers have invested in over 170 but over recent years they’ve gradually reduced this number. This means they can invest more in their favourite companies as their conviction grows.

The past year has seen a wave of new companies listing on the stock market to fuel their next stage of growth, known as an initial public offering (IPO). The managers have invested in several new companies such as financial marketing company Dianomi, consumer goods wholesaler Kitwave and online builders’ merchant CMO group. In contrast, the managers sold their investments in software company Argo Blockchain following increasing volatility surrounding the price of crypto currencies. Resourcing company Global Atomic was also sold as the share price had already risen strongly and the managers feel there is limited room for further growth.

This fund can also invest in unquoted companies. The managers only invest in a small number and don’t intend to make any further investments in these. In fact, they have been reducing some of these holdings where possible such as mining company Moxico. Investors should be aware that investment in unquoted companies is higher risk and they can be considerably less liquid than those traded on established stock exchanges.


The culture within the team is one of its strengths. It’s a close-knit one, with everyone fully behind the same investment philosophy. They are employed by Hargreave Hale, an asset manager which was bought by Canaccord Genuity, a Canada-based financial services company, in 2017. Canaccord provides them with plenty of resources while allowing the managers the freedom to run their funds the way they see fit. The way Canaccord rewards them ensures they’re focused on the long term, which is a good thing for investors.

Marlborough Fund Managers, from where the fund gets its name, is a separate company. It provides the fund’s marketing and distribution and doesn’t get involved in the investment side of things. It’s an uncommon set up, but one that’s been in place for many years, and seems to work well and suit everyone involved.

The firm integrates environmental, social and governance (ESG) factors into their company analysis. They believe this helps to highlight businesses that use more sustainable practices and could thrive over the long term. It could also uncover risks that are less obvious through more traditional company analysis. That said, this is not an ‘exclusions-based’ fund as it can invest in any sector.


The fund has a standard annual ongoing charge of 0.81%, but we’ve secured a 0.15% saving for HL clients. That means a net ongoing charge of 0.66%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. We think this is excellent value for access to some of the most talented managers and teams in the UK Smaller Companies sector. The HL platform fee of up to 0.45% per year also applies.


The fund’s delivered strong returns since launch in October 2013. Over this time it’s grown 209.12%* vs 100.84% for the FTSE Small Cap (ex Investment Trust) index. It’s also outperformed the 139.95% return for peers in the IA UK Smaller Companies sector. Past performance is not a guide to the future. Our analysis suggests this is down to the managers’ ability to invest in companies with strong futures ahead of them. All investments will fall as well as rise in value, so you could get back less than you invest.

During periods of market stress, the fund has historically held up better than both the benchmark and the IA sector average. Although, it is important to remember that smaller companies are less liquid (their shares are harder to trade), which can heighten falls if lots of investors try to sell at the same time.

Over the past year the fund returned 23.45%, underperforming the benchmark return of 31.26%. Our analysis suggests this is a result of style though, not stock selection. That said, the fund outperformed the IA sector average of 22.90%.

Software company Cerillion was one of the top performers over the year supported by record interim results in 2021. Cloud computing company Beeks Financial Cloud also helped returns with the company recently announcing revenue forecasts that were ahead of expectations. Other notable performers included Impax Asset Management and cellular agriculture company Agronomics.

Annual percentage growth
Dec 16 -
Dec 17
Dec 17 -
Dec 18
Dec 18 -
Dec 19
Dec 19 -
Dec 20
Dec 20 -
Dec 21
Marlborough Nano-Cap Growth 31.06% 1.14% 19.45% 25.54% 23.45%
FTSE Small Cap ex Investment Trust 15.61% -13.80% 17.68% 1.65% 31.26%
IA UK Smaller Companies 26.74% -11.83% 26.21% 7.21% 22.90%

Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2021.

Find out more about Marlborough Nano-Cap Growth, including charges

Marlborough Nano-Cap Growth Key Investor Information

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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