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Artemis US Smaller Companies
While stock selection is paramount on this fund, the overall shape of Artemis US Smaller Companies will reflect the manager’s view of the US economy. Investing mainly in US small-caps, but also with a tilt to mid-caps, manager Cormac Weldon uses multiple sources of information to generate ideas and to validate and test candidate companies for investment. Cormac and his team have refined their investment process over 16 years and are one of very few US equity teams that has consistently been able to add value over many years in the hard-to-beat US market.
Our opinion
This fund and team show why active management is still worthwhile in the USA. Not only has the Artemis US Smaller Companies fund consistently beaten its own peers and benchmark, but it has also delivered performance well in excess of the S&P 500. What is particularly impressive is the steady and consistent outperformance. This suggests a very repeatable process, which we think can continue to do well in the future.
Company description
UK-based Artemis was founded in 1997 as a limited liability partnership. Affiliated Managers Group (AMG) and the management team at Artemis own 100% of the equity of the business. This is a financial partnership; AMG takes a share of the revenues produced by Artemis but does not get involved in the day-to-day running of the business. A recipient of the Elite Provider for Equities rating in 2015, 2016, 2017, 2018 and 2020, Artemis has retained its manager-centric, innovative and supportive culture, which has helped it to attract and retain talented investors.
Fund manager
Cormac Weldon is the lead manager of the Artemis US Smaller Companies fund and the head of the US team. After graduating from university, Cormac joined KPMG. He then moved to Provident Mutual where he was a US equity analyst and spent two years as a fund manager for the British Gas pension fund. Cormac joined Threadneedle in 1997, later becoming head of the North American team. Cormac and some other members of the team left Threadneedle to join Artemis in 2014. Few other US fund managers can rival Cormac’s level of experience.
Cormac Weldon Fund manager
Investment process
The team believes that markets are inefficient and slow to price in new information. This gives opportunities for the active investor. The process begins with macroeconomic analysis to understand secular and cyclical trends. The fund is style agnostic and the team will tilt the portfolio to growth or value style to suit prevailing market conditions.
Stock ideas come from company meetings, the team's analysts or sell-side research. These are complemented with data mining and financial analysis. The team is very well resourced: Cormac is supported by a team of seven dedicated sector analysts.
Promising ideas are followed up with detailed research. As part of the analysis the team will evaluate the business model, the financial model, company management and valuation.
In valuing a stock the analysts consider the company’s prospects over a number of years, but confine forecasting to just one year as this is the furthest period which can be modelled with any degree of accuracy. Throughout the valuation process the analysts will model different scenarios and develop a range of outcomes.
ESG
ESG - Integrated
Cormac believes that ESG analysis helps to identify risk associated for a stock, as well as identifying potential opportunities, and its inclusion is becoming increasingly impactful to stock valuations. As such, he will look to identify factors that are affecting a stock, then see if they are material to the investment case. If they are determined as material, he will do further analysis, culminating in engagement with the firm to discuss potential issues and setting progress goals for improvement. Artemis as a group has systematically integrated ESG factors into its stock research process since 2020.
Risk
The final portfolio is high conviction and quite concentrated for a smaller companies fund, which means good stock selection is key. Despite its name the fund has a tilt towards mid-caps with the average holding's market cap typically around $7.5bn, but investing in this part of the market can involve more risk than investing in larger more established companies. Sector positions are limited to +/- 10% versus the index and position sizes are limited to +/-5% versus the index.
The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.