A new investment opportunity – 26 years in the making
I have been an investor most of my life. Throughout the years, some of the most pleasing performance has come from smaller companies funds.
The Marlborough Special Situations Fund has been a particular highlight. Until recently, it was managed by Giles Hargreave, of Hargreave Hale. Under Giles’s tenure, from July 1998 to December 2020, the fund has delivered a 3,942.9% return – compared to the average of 676.0% from the IA UK Smaller Companies sector. Past performance is not a guide to the future.
It’s not surprising, then, that Wealth Club’s interest was piqued when we were approached this summer by Giles’s former protégé Mark Chadwick to discuss a new investment proposition.
Hargreave Hale is one of the UK’s best-regarded boutique investment house specialising in small and mid-cap companies. Mark spent 23 years there, working closely with Giles Hargreave as part of a close-knit team, and another three years as an investment director of Canaccord Genuity, which took over Hargreave Hale in 2017. Eventually, Mark was responsible for c.£350 million bespoke discretionary mandates.
Last year, Mark left Canaccord Genuity to join established stockbroker Dowgate Capital – setting up Dowgate Wealth with six other ex-Hargreave Hale investment managers.
The team has now launched a new service for experienced investors: the Dowgate Wealth UK Best Ideas portfolio. This discretionary managed portfolio is available exclusively through Wealth Club. The deadline for the first close is 15 December.
Freedom to seek market-beating returns
The aim of the service is simple: to invest in smaller companies the team believes capable of delivering exceptional returns.
There are, of course, no guarantees of success. Investing in smaller companies is by nature risky – you could lose all your capital.
That said, three factors make the proposition stand out, in our view. Bear in mind, as always, you should form your own opinion.
1. The team
You’d be hard pressed to find a team with more convincing credentials. Having learnt the ropes from Giles Hargreave – one of the UK’s best-regarded smaller company investors, with a richly deserved reputation as a skilled stock-picker – Mark and his team have been managing portfolios for high net worth investors for years. Perhaps most tellingly, many of those investors followed the team when it left Hargreave Hale. The team already manages £400 million at Dowgate.
Importantly, investors can have easy personal access to all members of the team – and it is intended that any request is met accurately and on time.
2. Unconstrained access to the best growth opportunities – including IPOs and placings
In its pursuit of exceptional growth potential, the Dowgate Wealth UK Best Ideas portfolio will target main market and AIM-quoted companies (typically with a market cap of up to £2 billion), as well as IPOs and placings.
This means the portfolio could give private experienced investors access to opportunities normally only open to institutional or professional investors. Although we’ve witnessed a fundraising frenzy over the past 18 months (the first half of 2021, the strongest since 2017, saw 41 IPOs on the LSE raising £9.9 billion), retail investors have been largely shut out from participating.
Dowgate Wealth UK Best Ideas is a discretionary portfolio. The manager has freedom to invest where it sees the best opportunities. There are no restrictions on the type, age or size of company in which the service can invest. Nor is there a requirement to meet any sector or type-of-asset quotas.
3. Timing of the opportunity
In its latest forecast, the International Monetary Fund predicted the UK will be the world’s fastest-growing advanced economy this year – ahead of the US and the rest of Europe.
If we look back over the last 12–18 months, much of the growth appears to be happening at the smaller, entrepreneurial end of the market, with small companies outshining their larger counterparts amidst the pandemic gloom.
Since the lows of March 2020 to September 2021, the IA UK All Companies fund sector has grown by 49.4%. Over the same period, the IA UK Smaller Companies fund sector has grown by 87.5%.
Looking further back, despite the UK enduring a spell of poor investor confidence, the larger-company-focused IA UK All Companies sector has generated returns of 38.4% over the last five years, whilst the IA UK Smaller Companies sector has produced 91.0%. Past performance is not a guide to the future.
Risks – important
As can be expected when investing in smaller companies (albeit not startups; the average market cap is expected to be around the £1 billion mark), capital is at risk. The whole portfolio could fail and you could lose your capital. Hence, this service is only for experienced investors with significant assets.
There are no tax benefits associated with investing. The portfolio is not available in an ISA.
The Dowgate Wealth UK Best Ideas service is now open for investment. It is available exclusively through Wealth Club – minimum investment £50,000. The deadline for the first close is 15 December.
See five-year performance of investments mentioned above
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.