IN THE BACK

Full disclosure : we don ’ t make top-down calls in our Downing Fox funds . We avoid large , centralised decisions ( for example the US over Europe , growth over value or small over large caps ) that could jeopardise our clients ’ capital , preferring to buy a diversified group of exceptional active managers and , by harnessing their knowledge of individual companies , allowing them to navigate the markets presented to them .

However , though this isn ’ t by design , it feels good to be taking a contrarian view and writing about an area of the market that is currently out of favour : UK smaller companies .

This is hands down one of the best asset classes for long-term returns .

Yes , you have to deal with plenty of volatility along the way ( as we have seen recently ), but history has shown that investors who buy and hold UK small caps have been very well rewarded over the long term .

Making the most of it As fund investors , there are ultimately two key aspects to maximising the UK small-cap opportunity : firstly , backing an exceptional bottom-up stockpicking manager ; and secondly , backing a fund that is nimble and not capacity constrained . This leads us nicely onto our most recent purchase , the LF Gresham House UK Smaller Companies fund , which is managed by Ken Wotton and his team .

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