- Of the 42 funds analysed in this report, only a select few consistently outperformed across 3 month, 6 month, 1 year, 3 year and 5 year periods - with just 5 funds receiving a top 5-star Yodelar performance rating.
- Performance across the sector varied widely, with more than 40% of funds rated 1 or 2 stars for underperforming their sector average over multiple timeframes.
- The Aberforth UK Small Companies Fund ranked 1st out of 42 funds over 3 years with a return of 32.94%, and 2nd out of 40 over 5 years with a return of 93.19%.
- The Fidelity UK Smaller Companies Fund delivered the highest 5-year return of all 40 funds analysed at 101.30%
UK smaller companies funds invest in the next generation of British businesses - often fast-growing, innovative, and under the radar. These funds offer investors the potential for higher long-term returns, but they also carry more risk and volatility than larger, more established company funds.
In recent years, returns across this sector have varied widely. Some funds have delivered exceptional growth, while many others have struggled to keep pace with their peers.
In this report, we analyse the performance of 42 funds in the IA UK Smaller Companies sector over the past 3 months, 6 months, 1 year, 3 years, and 5 years. We identify the top-performing funds and highlight the 10 that achieved a 4 or 5-star Yodelar rating for consistently strong results across multiple timeframes.
UK Smaller Companies Fund Performance Summary
Our analysis of 42 UK smaller companies funds shows a varied picture of performance across the sector. Just under 12% of funds achieved a top 5 star Yodelar rating based on their results across multiple timeframes, with a further 6 funds receiving a 4 star rating for above average returns.
At the other end of the spectrum, more than 40% of funds were rated 1 or 2 stars, reflecting a pattern of below average performance relative to their peers.
While these results highlight which funds have delivered stronger returns in recent years, they also underline the importance of understanding what drives those returns. In a sector that can be more volatile and sensitive to changing market conditions, selecting funds with a clear and consistent strategy remains essential.
Strong past performance can be a useful indicator, but it should always be considered in the context of portfolio goals, risk tolerance, and the role each fund plays within a broader investment strategy.
What are UK Smaller Companies Funds?
The funds within the UK Smaller Companies sector invest in small-cap stocks – which are typically businesses with a market capitalisation below £1 billion. These companies are often in earlier stages of growth and can be more agile and innovative than larger firms. While they offer greater long-term growth potential, they also tend to be more volatile and carry higher risk, especially during periods of market uncertainty.
Top Performing UK Smaller Companies Funds
While overall results across the sector have been mixed, a small number of UK smaller companies funds have delivered strong and consistent performance across multiple timeframes. The table below highlights 10 of the best performers based on their 3 month, 6 month, 1 year, 3 year, and 5 year returns.
These funds each received a 4 or 5 star Yodelar performance rating and stand out for their ability to generate competitive results in a more volatile and demanding area of the market.
The above table provides the full discrete annual performance of each fund over the past 5 years.
1. Aberforth UK Small Companies Fund
The Aberforth UK Small Companies Fund is one of the most established mandates in the UK small-cap space. Since launch, it has remained committed to a disciplined value investing philosophy, targeting smaller UK-listed companies that trade at significant discounts to their long-term intrinsic value. The fund adopts a bottom-up approach, with a high-conviction portfolio built on fundamental company analysis and clear valuation discipline.
Its results have been consistently strong across both medium and long-term periods. Over the past three months, the fund returned 11.94%, placing it 12th out of 43 in its sector. Its six-month return of 5.99% and one-year return of 4.88% were both ahead of the sector average of 4.43%. However, it is over the longer term that the fund has delivered standout results - ranking 1st out of 42 funds over three years with a return of 32.94%, and 2nd out of 40 over five years, with a return of 93.19% compared to the sector average of 33.27%.
Performance has been underpinned by its strong exposure to domestically focused industrials, financials, and consumer companies - many of which remain attractively priced despite improving fundamentals. While value investing has at times fallen out of favour during growth-led cycles, Aberforth’s steadfast approach has allowed it to capitalise when market sentiment swings back toward undervalued stocks.
2. Artemis UK Smaller Companies Fund
The Artemis UK Smaller Companies Fund targets a broad range of high-quality small-cap UK businesses. The managers apply bottom-up stock selection, focusing on firms with improving financial metrics, such as rising profitability, earnings momentum, and disciplined capital allocation.
The fund has delivered strong results over multiple timeframes. Over the past six months, it returned 7.75%, ranking 11th out of 43 funds. Its one-year return of 5.94% placed it 9th out of 42, while its three-year return of 25.58% ranked 4th in the sector. Over five years, the fund returned 72.99%, placing it 6th out of 40 funds and well ahead of the sector average of 33.27%.
3. Dimensional UK Small Companies Fund
The Dimensional UK Small Companies Fund invests in smaller UK businesses using a clear and consistent approach. Instead of trying to predict which individual shares will perform best, the fund follows a set of rules based on long-term data. It focuses on companies that are smaller in size, attractively priced, and financially healthy - factors that research has linked to better long-term returns.
Over six months, the fund returned 11.14%, ranking 3rd out of 43 funds. Its one-year return of 10.75% was the strongest in the sector. Over three years, it returned 25.16%, and over five years, it achieved 54.49% - ranking 5th and 7th in the sector respectively and beating the average fund across each period.
Its broad mix of companies and low trading costs make it a practical choice for investors who want steady exposure to the UK smaller companies sector without relying on constant adjustments or forecasts.
4. Fidelity UK Smaller Companies Fund
The Fidelity UK Smaller Companies Fund invests in UK businesses that it believes have strong growth potential and the ability to maintain a competitive edge. The focus is on firms with stable earnings, healthy financials, and management teams with a clear plan for expansion.
Recent performance has been impressive. Over 3 months, the fund returned 13.33%, ranking 8th out of 43. Its 6-month return of 7.67% placed it 12th in the sector. Over the longer term, it returned 27.94% over 3 years, ranking 3rd, and 101.30% over 5 years - the highest return of any fund in the peer group.
The fund’s consistent results reflect its emphasis on company fundamentals and its ability to capture opportunities in the UK’s smaller companies market.
5. JPM UK Smaller Companies Fund
The JPM UK Smaller Companies Fund invests in a wide range of smaller UK-listed companies, with a focus on those that combine financial strength with good long-term growth prospects. The fund aims to identify businesses trading at attractive valuations and supported by solid fundamentals.
It has delivered strong returns across multiple periods. Over 6 months, it returned 8.76%, ranking 7th in its sector. Its 1-year return of 9.87% and 3-year return of 28.12% both ranked 2nd out of 42 funds. Over 5 years, it returned 54.21%, placing it 8th - comfortably ahead of the sector average.
The fund’s approach of blending data analysis with company research has supported its results through different market conditions, helping it maintain a competitive position among UK small-cap funds.
6. Premier Miton Tellworth UK Smaller Companies Fund
The Premier Miton Tellworth UK Smaller Companies Fund targets a select group of smaller UK businesses with the potential for long-term growth. Its managers focus on companies with solid fundamentals, strong market positions, and clear valuation support, using detailed company analysis to guide stock selection.
Recent performance has been encouraging. Over 3 months, the fund returned 14.11%, ranking 4th out of 43 funds. Its 1-year return of 6.12% placed it 8th in the sector, and over 5 years, it returned 45.35%, ranking 10th out of 40, all comfortably ahead of the sector average of 33.27%. Its 3-year return of 12.38% was more moderate, ranking 13th out of 42 funds.
While returns have varied across timeframes, the fund has delivered competitive results overall. Its focused approach and commitment to valuation discipline have supported performance during key recovery phases in the UK smaller companies market.
7. Schroder Institutional UK Smaller Companies Fund
The Schroder Institutional UK Smaller Companies Fund focuses on UK-listed small caps with strong financial foundations. The strategy targets businesses with healthy balance sheets, efficient capital use, and durable competitive advantages, while avoiding companies it sees as overpriced or overly speculative.
The fund has delivered strong performance across multiple timeframes. Over 3 months, it returned 17.57%, ranking 2nd out of 43 funds. Its 6-month return of 11.52% and 1-year return of 9.73% placed it 2nd and 3rd in the sector respectively. Over 3 years, it returned 22.37%, and across 5 years, it achieved growth of 48.34%, both results ranking comfortably within the sectors top 10.
Its consistent performance highlights a clear commitment to valuation discipline and financial quality. This has helped the fund navigate more volatile conditions while remaining competitive over the medium and longer term.
8. Schroder UK Smaller Companies Fund
The Schroder UK Smaller Companies Fund focuses on finding well-managed, attractively valued UK small-cap companies with the potential for sustainable earnings growth. While it remains aware of its benchmark, the fund takes an active approach, adjusting its holdings when better opportunities are identified.
It has delivered strong results over short and medium-term periods. Over the past 3 months, it returned 18.80% – the highest in the sector. Its 6-month and 1-year returns of 11.62% and 7.95% ranked 1st and 5th respectively. Over 3 years, it returned 22.63%, placing 7th, and over 5 years it gained 43.01%, ranking 12th.
These results show that the fund has managed to perform well through different market conditions. Its flexible approach allows it to take advantage of opportunities when they arise, while staying focused on solid, well-run companies. This has helped it deliver consistent outcomes across multiple timeframes.
9. VT Teviot UK Smaller Companies Fund
The VT Teviot UK Smaller Companies Fund focuses on finding smaller UK businesses that are overlooked or trading below their true value. It invests in companies where it believes the market has missed the longer-term potential, particularly those with recovery prospects or scope for positive change.
The fund has delivered strong returns in recent years. Over the past 3 months, it returned 13.75%, ranking 5th out of 43 funds. Its 6-month return of 7.92% also placed it in the top 10. While its 1-year and 3-year results of 5.41% and 18.17% were more middle of the pack, its 5-year return of 81.55% was one of the best in the sector, ranking 4th out of 40 and well ahead of the sector average.
This strategy has rewarded patient investors, particularly during periods when smaller companies with strong fundamentals have come back into favour.
10. WS Gresham House UK Smaller Companies Fund
The WS Gresham House UK Smaller Companies Fund backs high-quality UK businesses at the smaller end of the market. It focuses on companies with clear competitive strengths, experienced leadership, and the potential to grow earnings consistently over time.
Short-term performance has been steady, with a 3-month return of 10.71% and a 6-month return of 5.35% - both modestly above the sector average. Its longer-term returns have been more impressive. Over 1 year, the fund returned 7.41%, ranking 6th out of 42. Over 3 years, it delivered 21.51%, and its 5-year return of 78.45% ranked 5th out of 40 funds - well ahead of the sector average of 33.27%.
The fund’s ability to deliver over longer periods highlights the benefit of its focus on durable growth businesses and long-term investment discipline.
Summary
The funds featured in this review have delivered strong results across different timeframes. But while good past performance can be a sign of quality, it shouldn’t be the only reason to choose a fund.
Many investors naturally gravitate toward funds that have recently performed well - building portfolios around 1, 3, or 5-year numbers without looking at what’s driving those returns. The danger is that portfolios may look diverse on the surface but are actually heavily reliant on the same market areas or investment style.
This is a particular risk in the UK Smaller Companies sector. Smaller businesses tend to be more sensitive to changes in market mood, economic uncertainty, and investor confidence. Some funds perform strongly during growth periods but struggle when conditions shift. Without knowing how a fund achieved its returns - whether it relied on a small number of stocks, favoured a specific investment style, or took on higher risk - investors could end up backing recent winners that may not hold up in future.
There’s also the issue of overlap. Many small-cap funds hold similar stocks, especially among mid-sized companies. This can create the impression of diversification when, in reality, the same underlying holdings are being repeated - reducing the effectiveness of the overall strategy.
To build a stronger portfolio, it’s important to look at other factors besides performance tables. Understanding how each fund invests, how consistent it’s been, and what role it plays in the bigger picture is essential.
For those looking to add exposure to smaller UK companies, the focus should be on finding high-quality funds that add something different to a well-balanced mix - not just those with the highest recent returns.
Bringing Clarity to Portfolio Performance and Planning
At Yodelar, our portfolio analysis service is designed to give investors clear insights into how each fund within their portfolio has performed and to identify any areas of inefficiency that may be holding back long-term results.
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