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Standard Life UK Smaller Companies - backing the tortoise over the hare

Jonathon Curtis | Thu 22 November 2018

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.
  • Harry Nimmo invests in companies in good financial health that he thinks will grow
  • He prefers growth that’s steady rather than potentially rapid but erratic
  • Long term performance is excellent

Our view

We think experience counts when investing in UK smaller companies. And there aren’t many more experienced managers than Harry Nimmo. He’s invested in UK smaller companies for over two decades. During that time he’s built up an enviable track record.

Nimmo uses a robust process and is backed by a strong team. He prefers growth from companies that’s steady and reliable rather than fast but unpredictable, and this has led to good long-term performance. There’s no guarantee how the fund will perform in the future though. It’s currently on the Wealth 150 list of our favourite funds.

How’s the fund performed?

Nimmo’s delivered excellent results over the long term. In the past 10 years he’s grown the fund by 398.5%. The FTSE Small Cap (excluding investment trusts) index grew 269.3% over the same time. Past performance isn’t an indicator of future performance.

More recently the broader market of smaller companies fell in value, and this impacted the fund’s performance. This is a short time period though and we prefer to focus on the longer term. But it’s a reminder smaller companies can be volatile and are higher risk than larger firms.

Standard Life UK Smaller Companies 10 year performance

Past performance is not a guide to the future. Source: Lipper IM to 31/10/2018

Annual percentage growth
Oct 13 -
Oct 14
Oct 14 -
Oct 15
Oct 15 -
Oct 16
Oct 16 -
Oct 17
Oct 17 -
Oct 18
Standard Life UK Smaller Companies -5.9% 26.6% 3.3% 34.0% -1.9%
FTSE Small Cap ex Investment Trust -0.1% 13.1% 6.7% 21.9% -8.1%

Past performance is not a guide to the future. Source: Lipper IM to 31/10/2018

How the manager invests

Nimmo focuses on small companies he thinks are in good financial health and have excellent growth prospects. He thinks they’re more likely to survive times of market turbulence.

When times are good and companies are growing, he likes to ‘run his winners’. So he’ll stay invested as they become larger. That makes his average company size bigger than many other smaller company funds. We like the fact he takes a long-term approach to investing. He also has the flexibility to use derivatives, which if used adds risk.

Software companies currently make up 13% of the fund. Nimmo likes the software sector as he thinks it’s a reliable source of future growth. On the other hand, he avoids oil, gas and mining companies. Many in those sectors have done well recently, but he thinks they’re too risky.

Manager’s outlook

Nimmo’s more optimistic than a lot of other investors. While some are quick to sell investments that’ve performed well, he thinks certain companies have strong enough advantages to keep them leading the pack year after year.

Fevertree’s an example. Some investors think the company’s shares don’t offer a lot of growth potential after already performing well. But Nimmo thinks differently and still sees big potential for the company. That’s why it’s one of the fund’s biggest investments.

All investments can fall as well as rise in value so you could get back less than you invest.

Nimmo knows many investors are worried about the impact of Brexit. But the average company in the fund earns more money from overseas than in the UK. His outlook for the fund is positive, but further volatility shouldn’t be ruled out.

Please read the Key Features/Key Investor Information in addition to the information above.

Find out more about this fund including charges

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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