Marlborough UK Micro Cap Growth: December 2025 fund update

• Guy Feld and Eustace Santa Barbara hunt for companies with growth potential in some of the smallest parts of the UK stock market

• They follow the same investment philosophy and process established by their highly regarded predecessor, Giles Hargreave

• Over the last year, the fund has generated a return of 6.27%*, which lags behind the 8.09% return from the FTSE Small Cap ex IT index, but is ahead of the 2.38% average return from funds in the IA UK Smaller Companies sector.

• This fund does not feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

IFSL Marlborough UK Micro-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 can be overlooked by other investors which can provide an opportunity for the managers to uncover hidden gems.

The fund could complement other investments focused on larger global or UK companies. Additionally, its growth focused investment style means it may work well alongside a ‘value' fund, investing in out-of-favour companies with the potential to recover. Smaller companies are higher-risk, and we believe they should only form part of a well-diversified portfolio.

The fund does not currently feature on the Wealth Shortlist as we have higher conviction in other UK Smaller Companies funds.

Manager

Guy Feld has co-managed this fund since February 2012 and has decades' worth of experience analysing small and medium-sized companies. Feld has particular focus and expertise within the tech sector. He is also co-manager of the Marlborough Global Innovation fund. In January 2021, Eustace Santa Barbara was appointed co-manager alongside Feld. He has over 17 years' experience in the industry and joined Marlborough in 2013 from Close Brothers.

Collectively, the duo also manage Marlborough Nano-Cap Growth and Marlborough Special Situations, which also focus on UK smaller companies. Both managers are experienced UK smaller companies investors.

Process

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

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 growing 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 and resume their growth trajectory.

The managers run a diversified portfolio of around 170 companies. Historically the managers have invested in over 250 but over recent years they have gradually reduced this number. This means they can invest more in their favourite companies as their conviction grows.

At the end of November 2025, the fund had 2.96% of its assets invested in unquoted companies. This includes 2.13% invested in SCA Investments, 0.66% in Moxico and 0.17% in Infinity Reliance. Investors should be aware that investments in unquoted companies are higher risk, and they can be considerably less liquid (their shares are harder to trade) than those traded on established stock exchanges.

The managers have committed to not making further investments into the shares of unquoted companies, though the weight of existing unquoted investments in the fund can change as the fund size changes.

In recent months, the managers have made some changes to the fund, increasing its investment in vetinary services provider CVS Group, and reducing the position size in gold miner Pan African Resources.

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, and 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 a standard annual ongoing charge of 0.79%, but we've secured a 0.09% saving for HL clients. That means a net ongoing charge of 0.70%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL account charge of up to 0.45% per year also applies, except in the HL Junior ISA, where no account charge applies.

Performance

Since Feld began managing the fund in February 2012, it’s delivered returns of 240.99%* but hasn’t kept up with the returns of 286.98% generated by the FTSE Small Cap ex Investment Trust index. It has performed better than the 195.89% return generated by the IA UK Smaller Companies peer group average though. Past performance is not a guide to the future.

Over the last year, the fund has generated a return of 6.27%, behind the 8.09% return from the FTSE Small Cap ex IT index, but is ahead of the 2.38% average return from funds in the IA UK Smaller Companies sector.

Our analysis suggests that the fund’s investments in the technology and communication services sectors posed headwinds to performance over the period. On the other hand, its underweight exposure to areas of the market which performed poorly, like energy, real estate and economically sensitive businesses contributed to relative performance.

Investments fall as well as rise in value, so investors could get back less than they invest. Investing in smaller companies is higher risk and investors should invest for the long term and be prepared for volatility along the way.