ASI UK Smaller Companies Fund

09 March 2022

3 minute read

Investing in smaller companies requires a skilled and experienced team, together with a lot of nerve and patience. It can be a rollercoaster ride, but it can also be rewarding for the long-term investor, looking to diversify their investment portfolio.

Who's it for? All investors

We often talk about diversification. About investing in different markets around the world. When it comes to investing in the shares of UK companies, that concept of diversification can be taken a step further, by investing in some quite specific parts of the UK market.

While most investors initially flock towards investment funds that invest in the larger companies, there are funds that invest in other parts of the market. Examples include funds that focus on companies paying high dividends, funds that invest in companies going through a period of change or restructuring and there are funds that invest in the smaller sized companies. These smaller companies funds can offer investors the potential for attractive returns.

Why smaller companies?

We’ve all heard the stories of how the big successful companies of today started as smaller companies. Amazon’s early days involved Jeff Bezos selling books online from his garage. Apple also started in a garage, where Steve Jobs and Steve Wozniak built their first computers. And Mark Zuckerberg started Facebook while at university. Investing in these businesses at an early stage would have been very rewarding, where even a very modest investment would today represent a small fortune. Today, everybody wants to find the next big successful companies of tomorrow. And these could well exist in today’s smaller companies market.

Investing in smaller companies gives investors the opportunity to get in at an early stage. This younger stage in a company’s life is where they are typically disrupting markets by delivering new products and services. Smaller companies tend to be innovative, dynamic, and nimble. As a result, smaller companies have the potential to grow earnings faster than larger companies.

Not all smaller companies will succeed

With reward comes risk. And nowhere is this more prominent than in the smaller companies market. Not all smaller companies will become the next Microsoft. Smaller companies do not typically have the resources of larger companies to draw on during times of difficulty, especially during periods of recession or downturns.

And, because smaller companies are just that – small companies – it can be difficult to sell shares at a time when everybody else is selling (this is known as ‘illiquidity’). The result is a market that can be volatile, and where investors need to buckle up for the long term.

How to invest

The ASI UK Smaller Companies Fund has been investing in the shares of smaller companies for over 25 years. During that time, their approach to investing has not changed – they are simply looking to buy ‘tomorrow’s larger companies today’. The team looks to invest in high quality companies whose earnings are growing, and to avoid the speculative technology companies which to many investors typify what the smaller companies market is all about. We point to their success as being down to consistently applying this approach to every company they invest in.

The ASI UK Smaller Companies Fund is a fund worth considering if you’re thinking of diversifying your portfolio by investing in the smaller companies in the UK. There are also nine more funds on the Barclays Funds List which focus on the UK market. Find out more information on these funds.

Correct at the time of publishing.

To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These Barclays multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.

Past performance of the fund and its manager are not a reliable indicator of their future performance.

We don’t offer personal investment advice so if you’re unsure you should seek that independently.

Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ.

Read the Assessment of Value report [PDF, 3.2MB] for funds run by Barclays.

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