Key Morningstar Metrics for WS Gresham House UK Smaller Companies Fund
- : GoldMorningstar Medalist Rating
- : HighProcess Pillar
- : Above AveragePeople Pillar
- : AverageParent Pillar
This high-conviction UK smaller companies fund benefits from a differentiated and well-honed process that is informed by private equity techniques. Due diligence is deep and makes full use of a proprietary network of experts and contact with private companies. Fundamental risk management is strong, and active engagement is additive. The five-person team is led by experienced small-cap investor Ken Wotton. Overall, we think this is a strong option for UK small-cap equity exposure. We initiate coverage with an Above Average People Pillar rating and a High Process rating.
Wotton is the lead manager and has over 20 years of industry experience in UK equity investing. He joined Gresham House in late 2018, following its acquisition of Livingbridge VC LLP. At Livingbridge, Wotton managed a micro-cap fund since 2009, which has a strong long-term track record, and a multicap income fund, which launched in 2017. This small-cap variant was launched in 2019 and is run in the same manner. Wotton has a long history of investing in small and medium-sized businesses and has for a long time maintained visibility across both public and private markets, which we see as a real advantage. The team has built strong stock-selection skills rooted in a private equity approach. Its wide network also means it can reach out to a broad range of companies and expert contacts, something that further sets it apart from competitors. The team also benefits from an investment committee of highly experienced professionals not on the team, which provides solid oversight.
The process is informed by a private equity mentality. The style can be broadly understood as quality value with an absolute return mindset that is benchmark-agnostic. It is well-honed to the asset class. We think due diligence is deep, and we like that active engagement forms a core part of the approach. The investment universe is tight, focusing on consumer, TMT, financials, business services and healthcare. The focus on quality means they eschew cyclical areas of the market, such as mining, oil and gas, banks, and real estate. Given the private equity mentality and propensity to buy low-valued quality companies, it is not uncommon to see approaches for holdings from trade buyers and private equity funds. While takeouts are not expected to be the primary source of performance over the long term, they do provide a useful backstop. Overall, we think the process is excellent, and we approve of the sophisticated fundamental risk matrix and conviction scores that inform sizing and overall portfolio construction, which is conviction-based.
The fund launched in February 2019. Since then, the fund has racked up some strong years. It provided robust downside protection in 2020 and went on to beat the Morningstar Category average and index in each year from 2020 to 2024. More recently, in 2205 and for the year to the end of August 2026, relative performance has lagged. This owes in part to style and industry biases. Over the long run, the quality characteristics of portfolio companies, such as high margins, good cash generation, and highly able management teams, are expected to support a strong performance profile. We think the portfolio currently trades at attractive valuations compared with the market when accounting for the quality characteristics it offers.
Given the high-conviction nature of the portfolio, capacity is something we will monitor. There remains sufficient headroom for now, with assets under management sitting around the GBP 250 million mark.
WS Gresham House UK Smaller Companies Fund: Performance Highlights
Downside protection and an absolute return mindset are evident.
Ken Wotton has begun to build a commendable track record on this UK small-cap fund and on the much longer-running UK micro-cap fund. The fund’s performance profile stands out from the pack. From its inception in February 2019 through the end of August 2026, it is up 8.4% per year, outperforming the category average and category index by 3.5% and 3.3% per year, respectively. This is despite some recent underperformance that is largely attributable to some style and industry biases.
The fund had chalked up good performance in both growth markets in 2019-21 (though below explicitly growth-focused strategies) and then did better than most during the subsequent selloff in 2022. Overall, the fund is expected to provide attractive downside protection but can lag in sharp rising markets and low-quality rallies.
Relative performance in 2025 and for the year-to-date through August 2026 has lagged. This owes primarily to industry and style biases, as well as investing at the smaller end of the market-cap spectrum.
Notwithstanding this, we expect the fund to do well through the full cycle. It should benefit from a combination of earnings growth in less cyclical segments of the economy, combined with quality characteristics such as high margins and strong returns on capital. Meanwhile, holdings have low or no financial leverage, which provides greater resilience during uncertain macroeconomic times. This, alongside clearly defined sell discipline, led to solid performance in 2020.
