Why have smaller stocks struggled so much? If a company runs into trouble, the overall effect on our investors’ savings should be limited. We do a lot of research but we don’t get everything right all of the time. The vast majority account for less than 2pc of assets each. To help manage the risk and stop one stock doing huge damage our portfolio, we have 180 companies in the fund. Smaller companies can offer big returns to early investors – but if they run into problems, their share prices can plummet. If the customer has limited alternatives, it gives the company pricing power and that can provide a degree of protection in more challenging economic conditions. We like niche companies where there are few, if any, other businesses offering a similar product or service. There are always new and interesting companies coming on to our radar.įewer fund managers and analysts cover smaller companies, so by doing our own research we have an opportunity to identify businesses with the potential to grow before others do. One of the attractions of investing in smaller companies is the sheer number of opportunities. He adds that the recent stock market sell-off has created a “rare opportunity” to buy Britain’s smallest companies at a discount. Yet in spite of a challenging 12 months, he says most stocks in his portfolio are profitable and over time their strong potential will receive the recognition it deserves from investors. Mr Feld has been co-managing the fund for more than 10 years, while Mr Santa Barbara came in last year as veteran stock picker Giles Hargreaves stepped down. His £1.3bn fund, which he runs alongside Guy Feld, has lost 19pc over the past year, compared with a 14pc loss by rivals. This is something that Eustace Santa Barbara, co-manager of the Marlborough UK Micro-Cap Growth fund, is all too aware of. They had been prized for the promise of future earnings but now higher interest rates have diminished the value of those profits. It has not been an easy time for investors in Britain’s smallest listed companies, known as “micro-caps”, particularly those classified as “growth” stocks.Īs central banks have raised interest rates to tackle inflation, investors have had to re-evaluate the prospects of fast-growing companies. ‘Markets are choppy – but small stocks will always come out on top’įund of the Week: Marlborough UK Micro-Cap Growth manager on why huge falls in the shares of nascent British firms isn't a problem