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Royal London UK Smaller Companies Class M - Accumulation (GBP)

Sell:269.30p Buy:269.30p Change: 3.40p (1.25%)
Prices as at 21 November 2024
Sell:269.30p
Buy:269.30p
Change: 3.40p (1.25%)
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Invest now
Prices as at 21 November 2024
Sell:269.30p
Buy:269.30p
Change: 3.40p (1.25%)
Prices as at 21 November 2024
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Invest now
The selling price currently displayed is higher than the buying price. This can occur temporarily for a variety of reasons; shortly before the market opens, after the market closes or because of extraordinary price volatility during the trading day.

Our view on this Fund

This fund is on the Wealth Shortlist of funds our analysts believe have the potential to outperform their peers over the long term. However, this is not a recommendation to buy.

Royal London UK Smaller Companies aims for long term growth by investing in some of the smallest companies in the UK stock market. Smaller companies typically have more room for growth than larger ones, though they're more volatile and higher risk.

Growth is the overarching style of the fund, which means the managers focus on companies with long-term earnings growth potential. They also consider valuation meaning a company's share price should be lower than its future earnings suggest it should be. This investment approach is 'GAAP' - growth at an attractive price. This fund could add diversification to the UK portion of a more adventurous portfolio, or one focused on larger, more established businesses. Its growth focus could also complement other investments in out-of-favour value companies.

The fund was recently added to the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential.

Our Research team has spoken to Lowson several times and our conviction in him has continued to grow. We believe he's a passionate, considered and highly experienced smaller companies investor, with the potential to deliver attractive returns over the long term. Burrell has also impressed - he is driven and has worked closely with Lowson since joining the team. That said, our conviction mainly lays with Lowson who is the more experienced of the two.

Our view on the sector

Smaller companies in the UK are among the most innovative and exciting around. They can be pioneers of an emerging industry, and adapt quickly to new opportunities. We think their long-term growth prospects are compelling. Some will blossom into the giants of tomorrow. But others will struggle or fail altogether, so they are higher risk. Unlike larger companies such as Tesco or Vodafone, which might have dozens of analysts poring over their accounts, smaller companies tend to be less researched. They might only have one or two analysts covering them which creates opportunities for eagle-eyed fund managers to spot hidden gems. Over the past decade, innovations such as the internet have allowed smaller companies to level the playing field with larger rivals. Even so, they tend to be more sensitive to the UK economy then larger companies so you should expect more ups and downs along the way. We think UK smaller companies could be a great addition to a diversified portfolio able to accept the increased volatility.

Performance Analysis

Lowson has delivered impressive returns over the course of his management career. Since managing UK smaller companies' funds for retail investors, his track record has performed better than both the FTSE Small Cap (excluding Investment Trust) index and the average fund in the IA UK Smaller Companies sector. This includes his time running the AXA Framlington UK Smaller Companies fund between May 2012 and May 2016, followed by the Royal London UK Smaller Companies fund from September 2016.

Our analysis suggests that Lowson's performance throughout his career has been primarily driven through his stock picking ability and being invested in the right sectors. His funds have also tended to experience less volatility than the average UK smaller company's fund. As always past performance is not a guide to future returns.

His focus on higher-quality companies means we expect the fund to hold up better than the average when markets are falling. We saw this during the Covid setback in March 2020. We broadly expect the fund to keep pace with rising markets, but not when markets are driven by lower-quality, more value-orientated companies.

Investment Philosophy

The managers believe in the potential for superior growth from small and medium-size companies. With far less research available in this part of the market, the managers aim to use their experience to uncover hidden gems.

Share prices can rise and fall based on short-term news or market sentiment, but over the long run they tend to be driven by the quality of the company in question. That's why the managers undertake detailed company analysis to ensure the companies they invest in possess the traits that will enable them to grow more sustainably than most. They only buy companies whose share price looks attractive compared with its growth prospects. This leads them to favour quality companies that possess the financial resilience and leadership skills to thrive or survive when times get tough.

Process and Portfolio Construction

The managers take a long-term year view and assess companies using the acronym 'SIMBA': scalability, innovation, management, barriers to entry and unique assets. Companies require at least four of these characteristics to be considered for the fund. Emphasis is placed on company management which is why they conduct over 400 company managements meetings each year. This helps them gain a deeper understanding of their character, alignment with investors, and strategy.

This analysis whittles their investment universe down to around 65-80 companies. New investments make up between 1-1.5% of the fund and this can go up to 3% as the managers' conviction grows. This limit helps to keep the fund diversified.

The managers currently find plenty of opportunity in industrials and consumer discretionary companies. They also invest more in technology and healthcare than the benchmark. In contrast, they tend to steer clear of companies that are loss making, highly indebted and capital intensive such as real estate. They also avoid those that are highly sensitive to the health of the wider economy or commodity prices.

Please note, smaller companies are higher risk.

question mark Manager Track Record Based on HL Quantitative Research

This information is currently unavailable.

Fund Track Record

21/11/19 to 21/11/20 21/11/20 to 21/11/21 21/11/21 to 21/11/22 21/11/22 to 21/11/23 21/11/23 to 21/11/24
Annual return 9.28% 33.77% -30.11% -3.11% 10.69%

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Information about the fund

Fund manager biography

manager photo
Manager Name: Henry Burrell
Manager start date: 1 January 2020
Manager located in: London

Henry joined RLAM UK Equities team in December 2017 and works closely with Henry Lowson, focusing on the RL UK Smaller Companies Fund and the RL Mid Cap Growth Fund. He began his career at Smith & Williamson Investment Management in 2011 where he spent six years as an equity analyst. Henry has a BA Hons in History from Warwick University and is a CFA charterholder.

manager photo
Manager Name: Henry Lowson
Manager start date: 1 September 2016
Manager located in: TBC

Henry joined Royal London Asset Management in September 2016 as a Senior Fund Manager and is lead manager on the RL UK Smaller Companies Fund. Henry began his fund management career in 2005, spending almost 12 years working for AXA Investment Managers. In May 2012 he became lead Fund Manager of the AXA Framlington UK Smaller Companies Fund, which he ran successfully until joining RLAM. He was also responsible for co-managing a variety of segregated UK small/mid cap mandates while at AXA. He is a CFA Charterholder and a Member of the Chartered Institute for Securities and Investment. Henry graduated from Edinburgh University in 2004 with a MA (Hons) degree in Economics and Geography.

Data policy - All information should be used for indicative purposes only. You should independently check data before making any investment decision. HL cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used. Benchmark data provided subject to this disclaimer.
You can buy or sell holdings in this fund through a Stocks and Shares ISA, Lifetime ISA, SIPP or Fund and Share Account
Invest now