Marlborough Multi Cap Income: May 2025 fund update

• The fund has exposure to small and medium-sized companies offering potential for growth and diversification in income

• Siddarth Chand Lall has managed the fund since its launch in 2011

• Over the last 10 years, the fund’s return has lagged behind the FTSE All Share index

• 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

The Marlborough Multi Cap Income fund mainly invests in dividend-paying small and medium-sized companies, instead of the larger companies most UK equity income funds target.

These companies can offer greater growth potential because they’re at an earlier stage of their development, although this can also make them higher risk. As this fund invests differently, it could add diversification to UK equity income funds focused on larger companies or add equity exposure to a broader income portfolio. The focus on smaller companies increases risk and the potential for volatility.

Manager

Siddarth Chand Lall has managed the Marlborough Multi Cap Income fund since launch in July 2011. He joined Hargreave Hale in 2007 which is the investment manager to the fund. Hargreave Hale was bought by Canaccord Genuity in 2017, however there has been no change to the investment approach post-acquisition or since launch. Before joining he was an analyst specialising in UK and European smaller companies.

The manager works closely with income specialist Will Rosier and has the support of the broader small cap team.

Process

The fund aims to provide income and growth by investing in UK shares. It sits in the IA UK Equity Income sector but invests differently from some peers as a result of its exposure to small and medium-sized companies. This approach follows from the manager’s philosophy that smaller companies tend to outperform their larger counterparts over time – although this is not guaranteed, and smaller companies carry greater risk.

Through conducting its own research, the investment team believes it can uncover small and medium-sized companies where the market hasn’t recognised their true worth or growth potential. The fund invests in some larger, more established companies too. Chand Lall looks for good quality companies, whose shares are reasonably priced and either pay a steady dividend now or are expected to increase their dividend pay-out over time.

Following analysis of financial statements and meeting companies’ management, Chand Lall is responsible for deciding how much to invest in each company. He prefers to hold a larger number of stocks in the fund than some peers. As of February there were 92 stocks held in the fund. That’s more holdings than some other UK equity income funds, but this does reduce the risk of any one company’s failure impacting the fund’s returns or the income received.

The biggest sector allocations in the fund are to financials, consumer discretionary and industrials stocks with 26.6%, 21.5% and 21.3% invested in these sectors respectively.

The manager has made some changes to the fund over the last 12 months. This has included the sale of the fund’s shares in Canadian mining company Lundin Gold on valuation grounds following a period of strong performance. Oil and gas company Shell, and biotechnology business Bioventix were also sold following unsatisfactory meetings with the respective management teams of those companies.

Culture

Fund managers 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, which seems to work well and suit everyone involved.

ESG Integration

Marlborough’s focus on smaller companies means integrating ESG is more challenging, given a lack of external research coverage and quality ESG data. However, the firm is increasingly considering ESG factors, with a focus on governance.

Some Marlborough fund managers have suggested they’d be prepared to sell a company if ESG concerns couldn’t be resolved. Even so, we believe Marlborough’s ESG integration is at an early stage, and engagement activity is not as systematic as some peers.

Cost

The fund has an annual ongoing charge of 0.78%, but through Hargreaves Lansdown you can secure an ongoing saving of 0.19%. This means you’ll pay a net ongoing charge of 0.59%. Our platform charge of up to 0.45% per annum also applies, except in the HL Junior ISA, where no platform fee applies.

Part or all of the annual charge is taken from capital rather than income generated, this increases the income paid but reduces the potential for capital growth.

Performance

Over the last 10 years, the fund has delivered returns of 25.44%* to investors. This is significantly behind the 75.37% return from the FTSE All Share index, and the 59.85% return from the IA UK Equity Income sector average over the same period.

As is typical of funds with significant investments in smaller companies, returns have been volatile, especially compared with those focused on larger, more stable businesses. Past performance isn't a guide to future returns.

Over the last 12 months to the end of April 2025, the fund has delivered a return of -4.36%, performing worse than the FTSE All Share index which rose by 7.53% and the IA UK Equity Income sector average return of 5.91%.

Our analysis suggests that the fund’s investments in miniature figures maker Games Workshop and construction company Morgan Sindall Group have been among the most significant contributors to the fund’s performance. On the other hand, its investments in asset manager Polar Capital and packaging business Macfarlane Group have been among the key detractors from performance.

At the time of writing, the fund has a historical yield of 4.87%. Income isn’t guaranteed, and yields aren’t a reliable indicator of future income.