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Marlborough Nano-Cap Growth: February 2021 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 are a talented fund management duo, whom we hold in high regard
  • We believe the managers are supported by one of the strongest teams in the UK Smaller Companies sector, including Giles Hargreave – one of the most successful UK smaller companies investors
  • Could be considered for an adventurous portfolio looking to deliver long-term capital growth
  • 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

This fund aims to grow an investment over the long term by investing in some of the smallest companies in the UK stock market, including those not listed on the London Stock Exchange. By investing in emerging industries and disruptive sectors, the fund offers diverse exposure to the companies of tomorrow. These companies are often overlooked by other investors, which provides an opportunity for the managers to uncover hidden gems.

We think this fund could work well as part of an adventurous portfolio and complement funds focused on global or larger UK companies. However, smaller companies are higher-risk and should only form a small part of a well-diversified 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.


After several decades in the investment industry, Giles Hargreave recently stepped back from day-to-day management of this fund. Whilst no longer at the helm, Hargreave is still involved with the fund, taking up sector analysis responsibilities and offering guidance and knowledge to the next generation of managers.

Guy Feld has been co-manager of the fund since launch in 2013 and has over 25 years’ experience analysing small and medium-sized companies. He is also co-manager of the Marlborough Technology fund – he has always had a penchant for the technology sector and we think he can comfortably handle these responsibilities.

Eustace Santa Barbara was recently appointed co-manager of the fund after working alongside Hargreave since 2013 on the Marlborough Special Situations fund – a strategy also investing in smaller companies. Santa Barbara has over 16 years’ experience in the investment industry.

Collectively they 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 rate them highly. We believe they are supported by one of the strongest and best-resourced UK smaller companies teams, leaving few stones unturned when it comes to finding small companies with big potential.


Feld and Santa Barbara like companies that are easy to understand and have the potential to grow significantly over time. If successful, they will continue to top-up their favourite investments and ‘run their winners’. Healthy balance sheets are preferred, and they don’t like excessive levels of debt, although they acknowledge it may be prudent for companies to borrow money and take advantage of ultra-low interest rates.

The team focus purely on the long term. This is where we think they can add value. Before any investment is made, they like to meet with company management and assess their quality. Objectives set by the companies’ board are recorded and closely monitored in subsequent meetings - they like to follow up at least twice a year.

With more than 1,000 companies to pick from, the team have a broad investment universe. They mainly search for companies under £100m in size at the time of purchase. Most of the fund’s holdings 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.

Smaller companies are higher risk. While some may end up several times larger, some could do badly or even go bust. To mitigate the risk of one company significantly impacting performance, the managers run a diversified portfolio of around 140 companies – far more than their peers in the sector. Investments start small and build up as conviction grows with the maximum size recently being increased closer to 4%. The team think this enables them to express greater conviction in their best ideas.

The team have taken advantage of share price falls over the past year and topped up selective holdings at lower prices. More recently they added to companies such as SDI Group and Kooth, which provides digital mental health care services. They have sold consumer lending company, Morses Club, and taken profits from their largest holding, Jubilee Metals, as they look to manage stock-specific risk.

This fund can invest in unquoted companies. The managers only invest in a small number and don’t intend to make any further investments in companies not listed on the stock market. We assess the liquidity of this fund and receive regular liquidity data from the fund group. 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 fund has a standard annual ongoing charge of 0.8%, but we’ve secured a 0.15% saving for HL clients. That means a net ongoing charge of 0.65%. We think this is excellent value for access to one 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.


Since launch in October 2013, the fund’s performance has been exceptional, rising 161.2%* compared with the FTSE Small Cap (excluding investment trusts) index’s 58.1% gain. Our analysis puts this down to the managers’ ability to select exceptional companies that have gone on to perform well. Remember past performance doesn’t predict future returns though. All investments will fall as well as rise in value, so you could get back less than you invest.

UK Smaller Companies have particularly suffered amid global stock market volatility. They’re seen as more sensitive to the state of the economy than larger multinational companies. During periods of market stress, the fund has historically held up better than the IA UK Smaller Companies 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 many investors try to sell at the same time.

Since the lows in March 2020, the sector has rebounded strongly and much of the lost ground has been made up. Over the past 12 months the fund’s grown 25.5%, compared with 1.7% for the FTSE Small Cap (excluding investment trusts) index. Metal recovery business Jubilee Metals Group was a standout performer alongside Impax Asset Management which saw its assets under management (AUM) grow by 25% in Q4 of 2020. Other notable performers include natural resource company Greatland Gold and BATM Advanced Communications.

Annual percentage growth
Dec 15 -
Dec 16
Dec 16 -
Dec 17
Dec 17 -
Dec 18
Dec 18 -
Dec 19
Dec 19 -
Dec 20
Marlborough Nano-Cap Growth 13.4% 31.1% 1.1% 19.5% 25.5%
FTSE Small Cap ex Investment Trust 12.5% 15.6% -13.8% 17.7% 1.7%

Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2020.

Find out more about 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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