Over the past three calendar years, Investment Association sector UK Smaller Companies funds returned an average of 12%, and over 2025, that figure was 4.12%. The IA’s UK All Companies average for the two periods was 33.35% and 15.35%, respectively.
The top-performing small companies fund over three calendar years returned 37.73% – not much above the average for All Companies.
Filtering by those funds that have a three-year Lipper Leaders Consistent Return score gives us a smaller table than standard (10): only seven funds have made this. Stylistically, they are a mixed bag. While most are core by style, the top one by five-year returns (Aberforth UK Small Companies) is a value fund, according to Lipper’s holdings-based style analysis, and third-placed (JPM UK Smaller Companies) is growth. In a sector that is supposed to be the reserve of the active manager, one – iShares MSCI UK Small Cap UCITS ETF – is a tracker.
Small caps have faced tough conditions as rising bond yields and shifting inflation expectations increased pressure on leveraged firms, eroding earnings. Large caps, meanwhile, have benefitted from rate‑sensitive sectors such as banks and from inflation‑resilient industries such as energy and commodities, supported by substantial share buybacks.
Looking ahead, UK Small Caps could benefit from one of the trends that have lifted their larger peers: buybacks. Falling rates or an economic recovery could also provide the catalyst small caps need to rebound, although recent geopolitical events may reverse this hitherto positive trend.
All data as of February 28, 2026; Calculations in GBP
Source: LSEG Lipper
Methodology: LSEG Lipper first screened for only those primary share classes of active funds that have a Lipper Leader Consistent Return Score of 5—the highest possible—over three years. This combines the other LL elements in the table—expense, total return, and capital preservation—into a single risk-adjusted return score. We’ve then taken the top 10 by five-year return.
We wouldn’t argue that these are the best funds—Lipper doesn’t make recommendations—but rather that they exhibit strong risk-adjusted performance and have delivered strong absolute returns over the latest five-year period.
This research provided the basis for this article in FTAdviser.
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The views expressed are the views of the author and not necessarily those of LSEG Lipper. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. LSEG Lipper cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.
