Artemis SmartGARP Global Smaller Companies

The fund’s philosophy is that markets are inefficient because investors have a number of behavioural biases. The SmartGARP screen seeks to take advantage of these inefficiencies by scanning thousands of companies from the bottom up. The team believes that rigorous quantitative analysis has a significant advantage over the human brain. However, they also recognise the inherent limitations of screens, which is why Raheel and the team oversee the screen and carry out their own due diligence on companies.

The SmartGARP screen aims to identify companies which are growing faster than the market but trading on lower valuations. The strategy has a bias in favour of momentum and it looks for companies whose profit forecasts are being upgraded. The screen also looks for stocks which are under owned, meaning there is potential for more investors to buy the stock thereby increasing its price.

After removing companies with less than a $500 million market cap, and those with fewer than three analysts covering the stock, the screen ranks 3,000 companies on eight different factors: growth, valuation, estimate revisions, momentum, accruals, ESG macro and investor sentiment.

Once the screen has been run, the team start looking at the top 10% of companies (around 650) to undertake due diligence and build a well-diversified portfolio. The fund does not blindly invest in stocks and the team does careful work to check the output of the screen and make sure there are no other factors influencing the stock which have been missed.

The primary role of the fund manager is one of due diligence and they are not looking to introduce subjectivity or behavioural biases which might undermine the investment process. In Artemis’ own words, they estimate around 80% of the process is quantitative and 20% is human judgement.

The final portfolio will hold around 90 and 160 stocks.

The fund is broadly diversified, with individual positions typically held at modest weights (generally initiated at 0.3%–0.5% and capped at 5%) to help manage stock-specific risk. Sector and country exposures are also actively monitored, with flexible “soft” ranges versus the benchmark, allowing the portfolio to remain balanced while still reflecting the managers’ views. Style and factor exposures are similarly reviewed to avoid unintended biases.

As a global small-cap strategy, the fund invests in smaller companies, which can carry higher risk than investing in larger, more established businesses. In addition, the fund’s investment process can result in meaningful exposure to emerging markets. Investments in these regions may be subject to higher levels of volatility than developed markets.

Overall, while the portfolio is constructed with diversification and risk controls in mind, investors should be aware that small-cap and emerging market exposure can lead to higher volatility than a global large-cap equity fund and values may fluctuate more significantly over time.

ESG scores are integrated into the screening process with the fund rewarding companies with good or improving ESG scores. The screen uses two sets of data from third parties which go into the process. The first of these is from TruValue Labs, which builds several ESG sub-scores for each company. Secondly, it uses estimates for a company’s Implied Temperature Rise (ITR). Companies with lower carbon footprints get a higher score.