Great British gems
Are these Britain’s most promising companies?
The Association of Investment Companies (AIC) analysed the holdings of all 22 investment trusts in its UK Smaller Companies sector to reveal what companies are held by the most different trusts. The research revealed that XP Power, 4imprint Group and Alpha Group International are the most widely held, with eight trusts holding each one.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Smaller companies are far less researched than large caps, and investment trust managers are well placed to spot future winners. That’s because they spend their days scrutinising the business and its competitors in addition to meeting the management face-to-face and asking questions before they commit any money.
“Investment trusts are particularly suitable for investing in smaller less liquid companies. Their fund managers are able to take a long-term view of their portfolio because they are never forced sellers. Investment trusts offer a diversified range of promising companies which may grow to be world leaders of the future. Currently the UK Smaller Companies investment trust sector trades on a 12% discount, offering an attractive entry point.
A table of the companies held by most UK Smaller Companies investment trusts can be found on the next page. Source: theaic.co.uk / Morningstar (based on latest available portfolio information as at 09/05/25). Shows all companies held by at least five trusts in the AIC UK Smaller Companies sector.
So what makes these companies so special? We asked the trust managers to explain what made them such exciting investments.
Stuart Widdowson, Manager of Odyssean Investment Trust, holds XP Power, the joint most popular stock. He said: “XP Power is one of a handful of market leading power supply businesses with strong and long-term global customer relationships in industrial, semiconductor and healthcare sectors.
“The company, like its peers, is going through a periodic industry downturn, which is longer than historically has been the case. We have seen this before and the market recovery when it comes is likely to be very strong. Over the long term the company’s sales have grown at almost 10% per annum across the cycle.
“XP Power is one of a handful of market leading power supply businesses with strong and long-term global customer relationships in industrial, semiconductor and healthcare sectors. The company, like its peers, is going through a periodic industry downturn, which is longer than historically has been the case. We have seen this before and the market recovery when it comes is likely to be very strong.”
“The business model is highly cash generative. Its closest peer, which trades on NASDAQ, is valued at almost double XP’s rating. This peer launched a hostile takeover attempt last year at a price more than double the current share price. Given the limited liquidity of XP’s shares, an investment trust represents an optimal structure for holding this company, as it allows for long-term ownership without being forced to sell at depressed valuations and low sales multiples.”
Indriatti van Hien, Co-Manager of Henderson Smaller Companies Investment Trust, also holds XP Power. She said: “XP Power is a manufacturer of power solutions for the healthcare, semiconductor and industrial technology markets. Their integrated approach, which focuses on reducing power consumption and improving the durability of products, combined with the ongoing support they provide, means they tend to enjoy long relationships with customers.
“In addition, once they receive product approval from clients, there is an annuity-like revenue stream for the lifetime of the customer’s equipment, which is typically five to seven years. Their equipment is incorporated into a well-diversified range of products, including surgical robots, advanced semiconductor fabrication technology and analytical test instruments, all of which are sectors with long-term growth prospects.”
Charles Montanaro, Portfolio Manager of Montanaro UK Smaller Companies Investment Trust, has a stake in Harry Potter publisher Bloomsbury Publishing, held by seven trusts. He said: “It is the only UK-listed publisher to combine general and academic publishing under one roof – a strategic advantage that brings stability and resilience. Academic publishing, with its recurring revenues and strong margins, helps offset the more volatile nature of trade publishing.
“Bloomsbury has a remarkable ability to spot talent early: the charismatic and exceptional Nigel Newton, founder and chief executive, was the first to spot and back J.K. Rowling and Bloomsbury now owns the UK rights to the most successful children’s franchise in history. Today, Sarah J. Maas is emerging as the company’s next blockbuster author, with Bloomsbury holding global rights across all formats.
“With over 96,000 active titles and a successful shift to digital formats like e-books and audiobooks, the company is expanding margins and deepening customer engagement. The recent acquisition of Rowan & Littlefield further enhances Bloomsbury’s position in the global academic market. In short, this is a business with creative flair, recurring revenue, a low-risk portfolio approach to publishing and an enviable backlist – a rare combination.”
“Bloomsbury has a remarkable ability to spot talent early: the charismatic and exceptional Nigel Newton, founder and chief executive, was the first to spot and back J.K. Rowling and Bloomsbury now owns the UK rights to the most successful children’s franchise in history. Today, Sarah J. Maas is emerging as the company’s next blockbuster author, with Bloomsbury holding global rights across all formats.”
Georgina Brittain, Co-Manager of JPMorgan UK Small Cap Growth & Income, holds 4imprint, another joint top investment, held by eight trusts, and pensions consultant XPS Pensions Group, held by six. She said: “With a market share of around 5%, 4imprint is still the market leader in promotional gifting in the USA and is growing rapidly in the UK. Currently buffeted by concerns over the US economic environment and the potential tariff impacts, we expect 4imprint to prove itself a long-term winner, as it has in the past. The company has experience of previous downturns and indeed of the impact of US tariffs, and has a playbook of how to manage them, such that it is well positioned to benefit coming out the other side.
“The company has a track record of growing strongly into a recovery in its market and taking market share. Hugely cash generative, 4imprint also has a history of paying out significant special dividends, as demonstrated this year.
“One stock we are particularly optimistic about is XPS Pensions, the pensions consultant. We believe that the company is well positioned to benefit from regulatory changes necessitating increased demand for advice from pension schemes. XPS is also helped by a changing competitive landscape, with scheme trustees now required to retender for services more regularly, which has favoured medium-sized challengers such as XPS over the large incumbents. This has already begun to manifest in earnings delivery consistently ahead of the market’s expectations, alongside several hikes in the dividend.
“One stock we are particularly optimistic about is XPS Pensions, the pensions consultant. We believe that the company is well positioned to benefit from regulatory changes necessitating increased demand for advice from pension schemes.”
“In addition, XPS is benefitting from the huge growth in the pension risk transfer market, as a very large number of defined benefit pension schemes that are in surplus look to transfer the risk to insurers. The company has also recently made an acquisition taking it into the insurance consulting market, providing a further runway for growth.”
William Tamworth and Mark Niznik, Co-Managers of Artemis UK Future Leaders, hold MONY Group and GB Group, held by six and five trusts respectively.
William Tamworth, Co-Manager of Artemis UK Future Leaders, said: “As the owner of the Money Supermarket and MoneySavingExpert brands, MONY is the leading UK price comparison website. It has consistently generated strong cash flows – we estimate a free cash flow yield of 9% – and has a very strong balance sheet. This gives the business options: either to invest, to do M&A or to return surplus cash to shareholders: it’s currently one of the record numbers of small caps buying back shares.
“As the owner of the Money Supermarket and MoneySavingExpert brands, MONY is the leading UK price comparison website. It has consistently generated strong cash flows – we estimate a free cash flow yield of 9% – and has a very strong balance sheet.”
“We are particularly excited by the opportunity from SuperSaveClub – which now has 1.3 million members. This has the potential to reduce MONY’s reliance on Google and drive greater repeat business.”
Mark Niznik, Co-Manager of Artemis UK Future Leaders, said: “GB Group is a global market leader in online identify verification and fraud prevention. Over the long term it has an enviable record of delivering double digit organic growth as more activity migrates online. It has now paid off the majority of the debt it took on as part of the poorly timed Acuant acquisition and its strong free cash flow (we estimate a 7% free cash flow yield) has enabled it to launch a share buyback.”
Abby Glennie, Co-Manager of abrdn UK Smaller Companies Growth Trust, holds Gamma Communications (held by seven trusts), and Boku Inc (five trusts). She said: “Gamma Communications provides essential communications services to SMEs and enterprise customers, acting as a key route to market for tech giants who have been investing in innovative communications products. It offers numerous products and services, for example enabling internet voice calls to be integrated within a company’s existing telecoms system, leading to big savings.
“Over ten years since IPO, Gamma has delivered an 18% compound annual growth rate. The strategy includes offering an increased range of third-party products, helping drive growth without incurring overly hefty product development costs themselves. With 93% recurring revenue in the UK, Gamma has high earnings visibility, is cash generative and has a net cash balance sheet, supporting growth investments. Strong organic growth and bolt-on acquisitions, like Starface in Germany, enhance its market position. The company moved from the Alternative Investment Market (AIM) to the main stock market earlier this month, and we believe that will attract more investors.
“Gamma Communications provides essential communications services to SMEs and enterprise customers, acting as a key route to market for tech giants who have been investing in innovative communications products. It offers numerous products and services, for example enabling internet voice calls to be integrated within a company’s existing telecoms system, leading to big savings.”
“Boku is another key holding. It is an excellent technology business, standing out in a UK market often criticised for lacking leading technology stocks. Boku is a global payments platform, connecting global merchants with local payment methods (LPMs) in over 70 countries. In many of these countries, LPMs dominate over traditional Western card processing. The company also leads in direct carrier billing, allowing payments via mobile bills, and has invested heavily in building real-time payment networks and account-to-account solutions.
“LPMs are set to take an increasingly large share of digital commerce transactions. Boku’s common technology platform is cost effective, and its integration of many payment methods makes it tough for peers to replicate. Its infrastructure includes banking licences, cross-border payment capabilities, and treasury management. With a growing blue-chip global client base, Boku is critical for businesses selling in these markets.”
Indriatti van Hien, Co-Manager of The Henderson Smaller Companies Investment Trust, also commented on Telecom Plus and OSB Group, each held by five trusts. She said: “Telecom Plus is a multi-service provider of utilities via its Utility Warehouse brand. It has a structural cost advantage versus other challenger utility suppliers and after 33 energy suppliers went bust during the energy crisis in 2022, it now faces a more benign competitive environment.
“Another we like is OSB Group, a specialist lender of buy-to-let mortgages, a part of the market often underserved by mainstream banks which allows the company to generate attractive returns. The business targets a return on equity of 16%, has strong capital ratios yet trades at a material discount to book.”
“Strong resurgence of competition is not expected given the new capital requirements Ofgem have put in place post 2022. Its unique route to market (a partner distribution model), takes a certain amount of explaining, but should be a seen as deep competitive moat as it allows the business to sign on multi-service customers through a highly engaged sales process. They also benefit from lower churn and a better quality customer demographic (more homeowners) and therefore lower bad debts versus industry averages. The company provides investors with defensive growth and attractive cash returns.”
“Another we like is OSB Group, a specialist lender of buy-to-let mortgages, a part of the market often underserved by mainstream banks which allows the company to generate attractive returns. The business targets a return on equity of 16%, has strong capital ratios yet trades at a material discount to book.
“This combination allows the business to pay a dividend yield at a substantial premium to the market and retire capital through a share buy-back programme which will further enhance its net asset value per share. The company should also be a beneficiary of the Labour government’s plans to deregulate the financial services industry.”
Charles Montanaro, Portfolio Manager of Montanaro UK Smaller Companies Investment Trust, holds Genuit Group (formerly known as Polypipe), held by five trusts. He said: “Genuit Group offers an extensive portfolio of innovative solutions ranging from PVC drainage and plumbing pipes/products to low-carbon heating and cooling systems, clean and healthy air solutions and resilient surface water management – this means identifying ways to reduce the risk of flooding through diverting or managing water flows.
“With a current UK market share of around 20% and exposure to long-term themes such as sustainable construction, water management and infrastructure investment, we believe this is more than a cyclical recovery story – Genuit is a high-quality business with strong leadership and a growing moat.”
Investee company
No. of investment trusts that hold the company
Total market value held (£m)
XP Power
8
60.13
4imprint Group
59.58
Alpha Group International
54.12
Gamma Communications
7
71.11
Hill & Smith
67.89
Workspace Group
66.45
Bloomsbury Publishing
43.13
GlobalData
28.64
Videndum
15.24
XPS Pensions Group
6
93.06
Wilmington
78.05
Morgan Advanced Materials
53.28
Chemring Group
52.49
MONY Group
49.59
Vesuvius
5
69.76
Morgan Sindall Group
63.38
Tatton Asset Management
49.60
Hilton Food Group
48.58
Oxford Instruments
48.39
JTC Ordinary Shares
40.05
Future
38.70
Boku Inc Ordinary Shares
36.85
MJ Gleeson
34.85
Clarkson
34.20
Telecom Plus
33.05
Genuit Group
32.81
GB Group
32.13
OSB Group
31.40
Ricardo
30.87
discoverIE Group
30.42
Robert Walters
29.35
PayPoint
29.25
Hunting
27.25
Johnson Service Group
26.09
Savills
25.80
Cerillion
24.72
Treatt
21.61
Raspberry Pi Holdings
19.24
Vp
16.50
