Artemis UK Future Leaders: November 2025 trust update

• Artemis took over management of the trust from Invesco in March 2025 following a strategic review by the trust’s board

• We have a positive view of managers Mark Niznik and Will Tamworth who are both highly capable and experienced in investing in UK Smaller Companies

• The trust currently trades at a discount, which could offer an attractive entry point to long term patient investors

How it fits in a portfolio

The Artemis UK Future Leaders trust aims to grow an investment over the long term by investing in UK smaller companies. The valuation focused approach means the trust invests differently to many of its peers.

Smaller companies typically have more growth potential than larger ones, though they can be more volatile and higher risk. Companies of this size are often overlooked by analysts, meaning there are plenty of opportunities for investors prepared to scratch below the surface.

The trust could diversify the UK portion of an adventurous global portfolio or could complement a UK portfolio that is focused on larger, more established businesses.

Investors in closed-ended funds should be aware the trust can trade at a discount or premium to its net asset value (NAV).

Manager

The trust’s co-managed by Mark Niznik and Will Tamworth.

Niznik began his career at Legal & General in 1985, followed by a stint as a private client fund manager at Greig Middleton & Co. In 1992, he joined Perpetual, working on a range of UK smaller companies products. He then moved to Standard Life Investments in 2002 to work as a small and mid-cap fund manager, running a UK Opportunities strategy from its launch. In 2007, he joined Artemis and became co-manager of the UK Smaller Companies fund alongside seasoned investor and Artemis co-founder John Dodd. In January 2011, Dodd stepped back and Niznik became sole manager of the UK Smaller Companies fund.

Tamworth began his career at Citigroup as an equity research analyst in the UK small and mid-cap team. He moved to Liberum in 2009, where he continued to work in small- and mid-cap equity research, specialising in support services. He then joined Artemis in 2015 and in March 2016 became co-manager of the UK Smaller Companies fund.

Following a strategic review in 2024, the trust’s board decided to change investment manager, replacing Invesco with Artemis. As a result, on 10 March 2025, Niznik and Tamworth took over management of the trust.

We have a positive view of both managers. They are both highly capable and experienced in investing in this part of the market, and we believe managing the trust is complementary to their existing workload.

Meet the manager: Will Tamworth

Process

The managers believe smaller companies possess lots of growth potential. They aim to use their experience to uncover hidden gems and then benefit from investing in them as they grow in this under researched part of the market.

Niznik and Tamworth look for businesses that are leaders in their markets and have a good degree of visibility of their future earnings. These businesses should have strong balance sheets to support their growth and be driven by capable and experienced management teams. They should also be cash generative, and trade at attractive valuations, offering investors the prospect of good returns in the future. Not every stock will fulfil each of these criteria, so the managers are pragmatic in forming an overall view on how well a company fits the bill.

The managers won’t invest in companies that are pre-revenue because of their focus on cash generation. They are also sceptical about the prospect of investing in small businesses with very ambitious growth projections attached to their future performance expectations. The outcome of this process is a value style bias.

Since taking over the trust in March 2025, the managers have made a number of changes in order to align its investments with their preferred investment approach. In general the managers felt they inherited a good quality portfolio but in many cases, at valuations they weren’t comfortable with. This period of elevated turnover was in line with our expectations, and we expect to see it normalise from here.

The managers are optimistic about the return potential of their holdings in the trust and have highlighted the strength of consumer finances as potentially being the key to unlocking it. They believe that household disposable income remains strong in the UK, but consumers are choosing to save, rather than spend. Once confidence increases, they expect to see more being spent and less being saved, which should benefit lots of companies held in the trust.

The trust can borrow money to invest with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk. The manager can also use derivatives, which if used adds risk. The level of gearing employed as of the end of September was 8.20%, though the managers can take this up to 15% should they wish.

In addition, there may be some investments in smaller companies which, by their nature, can be higher risk and illiquid or harder to trade. The managers have the ability to invest up to 5% of the trust’s assets in unlisted companies. However they’ve committed to only investing in companies listed on the stock market and will not invest any of the trust’s assets in private or unlisted businesses.

Culture

Artemis provides an attractive environment for fund managers, allowing them the freedom to run money how they see fit without imposing a house view on them. It’s also a collegiate atmosphere, with managers supporting and challenging each other. The managers of the trust are partners in the business. We think this structure‘s a good thing for investors, as the managers and the firm are focused on the long term and can run funds and trusts without distractions from short-term shareholder demands. They are rewarded from the profits of the business, based on their long-term performance and payment of the profit share can be deferred over several years.

ESG Integration

Investment teams across Artemis are encouraged to think for themselves and invest according to their own style, so approaches to ESG integration across the firm vary. Recent meetings with the Artemis teams we back on the Wealth Shortlist suggest ESG is an important factor. However, this trust isn’t managed to a responsible mandate.

Artemis has a firm-wide policy to support the aims of international conventions on cluster munitions and antipersonnel mines and therefore the firm will not knowingly invest in companies which produce these weapons.

Artemis votes on all their holdings, unless restricted from doing so, and fund managers engage with firms to develop their understanding, raise issues with management and monitor subsequent developments. The firm provides engagement case studies, and other information about its engagement and voting efforts, in an annual Stewardship report. Artemis also provides a monthly voting summary which includes rationales for votes against management and abstentions. Stewardship activity is carried out in line with the firm’s comprehensive voting and engagement policies.

Cost

The trust’s annual ongoing charge to the end of January 2025 was 1.03%, slightly higher than the 1.01% for the year before. Investors should refer to the latest annual reports and accounts and Key Information Document for details of the risks and charging structure.

Going forwards, following the change of investment manager from Invesco to Artemis, the board announced a reduction in fees and Artemis agreed to waive their management fees until December 2025. It’s expected that this will reduce the fee from 1.03% to 0.84% for the year to end January 2026.

Performance

The trust experienced a number of years of underperformance prior to the strategic review which resulted in a change of management from Invesco to Artemis.

Since Niznik and Tamworth took over management of the trust in March 2025, to the end of October 2025, the trust has delivered a share price return of 9.30%, compared with 9.33% for the AIC UK Smaller Companies sector average. Investors should note that this is a very short time period to consider performance over.

The trust currently trades at a discount of 12.37%, this compares with a discount of 16.60% at its year end in January 2025. Though it has narrowed over this period, it’s still a significant discount to NAV and we think this could offer an attractive entry point to investors.

The trust’s dividend policy is to target a dividend yield of 4% of the year end share price, paid from income earned within the portfolio and enhanced, as necessary, through the use of capital gains.

In the trust’s last financial year to the end of January 2025, total dividends paid to shareholders amounted to 15.0p per share, in line with its dividend policy and representing a yield of 4.0% based on the share price as at 31 January 2025.

The trust currently has a dividend yield of 3.95%, although yields aren’t guaranteed and therefore aren’t a reliable indicator of future income.