Have you ever come across an investment that looks promising on paper but leaves you wondering if the price tag is just too steep? That’s exactly the feeling many investors get when they first dig into Onward Opportunities, one of the newer kids on the block in the UK investment trust space.
Launched back in 2023 with a relatively modest raise, this trust has quietly built a reputation for focusing on smaller UK companies and micro-caps. While it has posted some respectable numbers, the fees have raised more than a few eyebrows. I’ve spent time reviewing its approach, performance, and cost structure, and there’s a lot to unpack here for anyone considering small-cap exposure.
Understanding Onward Opportunities in Today’s Market
Small and micro-cap companies often get overlooked by larger funds, yet they can offer incredible growth potential if you pick the right ones. Onward Opportunities tries to do exactly that by taking a concentrated, hands-on approach. With assets now around £42 million after follow-on raises and moving to the main market, it’s still a small player but one that’s gaining attention.
What stands out immediately is the target return: an annualised 15% or better, with the goal of doubling capital over three to five years. That’s ambitious in any market, but especially in the current environment where UK smaller companies have faced headwinds from economic uncertainty and higher interest rates.
In my experience following these trusts, concentrated portfolios like this can deliver outsized gains when the manager gets it right, but they also come with higher volatility. Onward has managed to beat the AIM All-Share index over its short life, which is no small feat, but it hasn’t quite hit that lofty internal target yet.
The Manager and His Track Record
Laurence Hulse brings solid experience to the table. Starting his career at Gresham House in 2015, he worked across several equity strategies before setting up shop at Dowgate Wealth. The team has skin in the game too, with meaningful personal ownership alongside the manager’s firm holding a significant stake. That alignment of interests is something I always look for positively.
His background in smaller companies and activist-style opportunities shows through in the portfolio construction. It’s not just passive stock picking – there’s an active element where the team seeks to influence change where they see hidden value.
Profitable, cash-generative businesses with the potential for activist involvement tend to be where the real opportunities lie in this segment of the market.
That’s the kind of thinking that can separate good managers from the crowd. Yet execution and costs will ultimately determine investor outcomes.
Portfolio Construction: Concentrated and Targeted
Onward runs a tight ship with around ten core holdings making up the bulk of the portfolio, plus a dozen smaller “nursery” positions that allow for testing new ideas without massive commitment. This 25% nursery sleeve provides flexibility while keeping the main bets focused.
At the end of June, top positions included Likewise at nearly 10% and Angling Direct around 8%. Likewise, a distributor of floor coverings, caught my eye because of the thesis around outperforming weaker competitors. The company has strong leadership with a proven track record of value creation in previous roles.
- Focus on cash-generative UK smaller companies
- Activist opportunities to unlock value
- Concentrated core with exploratory nursery holdings
- Long-term holding periods of 3-5 years
Angling Direct represents another interesting pick, a specialist retailer where the team is pushing for strategic focus on core strengths rather than unprofitable expansion. These kinds of engaged positions can make all the difference in smaller companies where management execution is critical.
Recent Performance Breakdown
Over three years, the trust has delivered a share price return of about 18.5% and NAV total return closer to 26%. That’s ahead of the AIM benchmark but hasn’t fully met the internal 15% annualised goal. In a tough period for UK equities, particularly smaller ones, this isn’t disastrous, but it’s not spectacular either.
Compared to the broader UK Smaller Companies sector, it’s been roughly in line. What matters more is whether this outperformance can compound over time and justify the cost base. Recent additions like Portmeirion in the nursery book show the team is willing to back turnaround stories with new leadership from strong backgrounds.
| Metric | Onward Opportunities | AIM All-Share |
| 3-Year Share Price Return | 18.5% | 8.4% |
| NAV Total Return | 26% | N/A |
| Annualised Target | 15%+ | N/A |
Numbers like these tell only part of the story. The real test will be how the portfolio performs as the UK economy potentially recovers and smaller companies regain investor favor.
The Fee Structure: Where Things Get Expensive
Here’s where the trust faces its biggest challenge. The management fee starts at 1.5% on the first £50 million of assets, dropping to 1% thereafter. On its own, that’s not outrageous for an active small-cap strategy. But add in the 12.5% performance fee above a 6% hurdle, and costs start mounting quickly.
Ongoing charges have hit 4.4% and even 5.2% in recent years when performance fees kick in. That’s significantly higher than most peers – nearly five times the sector average in some comparisons. Even against similar activist-style trusts, it stands out as expensive.
I’ve always believed that fees should be earned, not assumed. When a manager delivers consistent alpha well above the benchmark after costs, high fees can be palatable. But right now, with the trust still building its track record, these charges feel heavy.
Strip away the fees and the underlying performance looks much more impressive. The question is whether investors get to keep enough of the upside.
Strengths of the Investment Approach
Despite the cost concerns, there are genuine positives. The focus on profitable, cash-generative businesses provides a margin of safety that’s often missing in growth-at-any-cost small-cap stories. In uncertain times, cash flow matters more than ever.
The activist element adds another dimension. Smaller companies frequently suffer from poor capital allocation or strategic drift. Having a meaningful shareholder willing to engage constructively can create real value over time. Onward’s team seems well-positioned to play this role given their experience.
- Deep research into UK micro-caps often ignored by institutions
- Concentrated positions allow for high conviction
- Skin in the game from managers builds alignment
- Clear three-to-five year investment horizon matches small company cycles
These elements create a strategy that could work very well in the right environment. UK smaller companies have historically delivered strong long-term returns for patient investors, and a skilled active manager can enhance those odds.
Potential Risks and Challenges Ahead
No investment is without risks, and this one has several worth considering. Small and micro-cap stocks are inherently more volatile. Liquidity can dry up quickly in market stress, making it harder to exit positions at fair prices.
The concentrated portfolio means a few bad picks could significantly impact overall returns. While the nursery sleeve helps mitigate this somewhat, the core holdings carry real weight. Economic slowdowns in the UK would hit smaller domestic businesses particularly hard.
Then there’s the fee drag. High costs compound over time and can turn good gross returns into mediocre net ones for investors. With the trust still relatively small, economies of scale haven’t fully kicked in yet to bring charges down.
How It Compares to Similar Options
When benchmarking against other UK smaller company trusts, Onward stands out for its concentration and activist tilt. Some peers offer broader diversification and lower costs but potentially less upside from individual stock selection. Others with similar strategies might have longer track records that provide more comfort.
The performance fee structure is fairly common but the hurdle rate and overall charges make this one pricier. Investors need to believe strongly in the manager’s ability to generate substantial excess returns to make the math work over five years or more.
Perhaps the most interesting aspect is how it fits into a broader portfolio. For those already exposed to UK large-caps or global equities, a dedicated small-cap specialist like this could provide valuable diversification and growth potential.
Who Might This Trust Suit?
Onward Opportunities probably appeals most to investors with a higher risk tolerance who believe in the long-term renaissance of UK smaller companies. Those comfortable with volatility and willing to hold for several years could find it rewarding if the strategy clicks.
More conservative investors or those sensitive to fees might prefer broader, cheaper index options or established trusts with proven lower-cost structures. It’s not a one-size-fits-all solution, which is true of most specialist investments.
In my view, the key is whether you trust the team’s process enough to accept the higher costs during the early years while they build scale and refine their approach.
Broader Context for UK Small-Cap Investing
The UK market has been out of favor for some time, with smaller companies suffering particularly from low valuations and limited investor interest. This creates potential opportunities for those willing to dig deep and take active roles.
Valuations in the small-cap space remain attractive compared to history and many international peers. If sentiment improves – perhaps helped by lower interest rates or positive political developments – the sector could see meaningful re-rating.
Onward’s focus on cash flow and sustainable businesses positions it reasonably well for such a recovery, provided they avoid value traps and manage the activist engagements successfully.
Key Holdings Deep Dive
Let’s look closer at some positions. Likewise benefits from a market where competitors are struggling with debt and losses. A well-run distributor in a fragmented sector can capture significant share if executed properly. The leadership’s past success adds credibility to the thesis.
Angling Direct taps into a passionate customer base in the fishing community. The push toward digital channels and app development makes sense as retail evolves. Getting the European expansion right – or refocusing domestically – will be crucial for future margins.
Newer nursery positions like the pottery firm show willingness to back experienced operators taking on challenged but iconic brands. Turnarounds take time, so patience will be required here.
Future Outlook and What to Watch
Over the next few years, several factors will determine success. Can the team continue finding attractive opportunities in a competitive small-cap universe? Will they successfully influence positive change in portfolio companies? Most importantly, can they deliver enough gross performance to overcome the fee burden?
Asset growth will help too. As the trust scales, the tiered fee structure should bring average costs down. Reaching critical mass could also improve liquidity and attract more institutional interest.
I remain cautiously optimistic about the strategy but would want to see a longer track record and ideally some fee adjustments before committing significant capital. For smaller allocations within a diversified portfolio, it could still play a role for those bullish on UK domestic recovery.
Investment Lessons From This Case Study
Looking at Onward Opportunities highlights several broader principles. First, alignment of interests through manager ownership is valuable but not sufficient on its own. Second, fees matter enormously over time – especially in lower-return environments. Third, niche strategies in inefficient markets like UK micro-caps can work but require exceptional execution.
- Always calculate net returns after all fees
- Understand the liquidity profile of underlying holdings
- Assess whether activist involvement adds genuine value
- Consider how the strategy fits your overall portfolio risk
These lessons apply far beyond this single trust. Successful investing often comes down to finding the right balance between potential reward and the various costs and risks involved.
As someone who follows the investment trust sector closely, I find cases like Onward fascinating. They represent the entrepreneurial side of fund management – smaller, more agile vehicles trying to deliver something different. Whether this particular one justifies its fees will only become clear with more time and data.
For now, it deserves watching. The underlying philosophy has merit, and the manager brings relevant experience. But investors must go in with eyes wide open about the costs and the challenges of delivering consistent outperformance in smaller companies.
What do you think? Have you invested in similar small-cap trusts, or are the high fees putting you off entirely? The debate around value for money in active management continues, and this trust sits right in the middle of it.
UK smaller companies have cycled through periods of neglect and rediscovery many times. Those who position themselves thoughtfully during the quieter times often reap rewards when sentiment eventually shifts. Onward Opportunities is attempting to do precisely that, albeit at a premium price.
Whether it ultimately succeeds will depend on stock selection, engagement success, and operating in a supportive macro environment. For patient, conviction-based investors comfortable with the risks, it could prove rewarding. For others, cheaper or more diversified alternatives might be more suitable.
The coming years should provide more clarity as the portfolio matures and the team executes on their vision. In the meantime, doing thorough due diligence remains essential before committing any capital to this or any specialist trust.
