The UK's top small-cap stocks for managers of investment trusts

Although they are disliked by some market segments, investment trust managers have a loyal following of UK small caps

Among experts in the field, four companies stand out in particular.

Many stock market experts favor UK small caps.

Although many of the most well-known stocks have large market capitalizations, there is compelling evidence that smaller businesses have greater room for expansion.

Smaller businesses in the UK have been named the world's least popular stocks. But according to Annabel Brodie-Smith, director of communications for the Association of Investment Companies (AIC), this is partially due to a lack of knowledge.

She asserts that "smaller companies are far less researched than large caps." Managers of investment trusts are in a good position to predict future success. Along with meeting with management in person and asking questions prior to making any financial commitments, they spend their days closely examining the company and its rivals.

The AIC has gathered data on the most well-liked businesses among the 22 investment trusts it oversees that focus on small-cap UK companies.

The findings indicate that among managers of small-cap investment trusts in the UK, four businesses stand out. Three of these are chosen by numerous trusts, and the fourth one shows the highest investment value of assets owned by small-cap investment trusts in the UK.

What are the most well-liked small caps in the UK?

These are the top 14 holdings among investment trusts that concentrate on UK small caps.

Theaic Dot Co Dot UK and Morningstar are the sources (based on the most recent portfolio information as of 09/05/25). shows all businesses in the AIC UK Smaller Companies sector that are owned by at least six trusts.

As far as the number of trusts holding them goes, XP Power, 4imprint Group, and Alpha Group International are the three most popular.

With its headquarters now located in London, 4imprint (LON:FOUR) was founded in the United States. In addition to the US and UK, it operates in Canada and Ireland and is a constituent of the FTSE 250. According to Georgina Brittain, co-manager of JPMorgan UK Small Cap Growth and Income (LON:JUGI), it is "the market leader in promotional gifting in the USA" and a direct marketer of promotional merchandise.

"We expect 4imprint to prove itself a long-term winner, as it has in the past," Brittain continues, despite the current upheaval caused by worries about the US economy and possible tariff effects.

JUGI's fifth-largest holding as of March 31 was Alpha Group (LON:ALPH), which accounted for 3.09 percent of the portfolio. It markets itself as "both fintech and consultancy," offering solutions for mass payments, global accounts, fund finance, and FX risk management.

For companies in the industrial technology, semiconductor, and healthcare sectors, XP Power (LON:XPP) manufactures and supplies power supplies and converters.

Co-manager Indriatti van Hien of The Henderson Smaller Companies Investment Trust (LON:HSL) appreciates the assured income streams the business receives from acquiring new customers.

"After clients approve the product, there is an annuity-like revenue stream for the customers' equipment's lifetime, which is usually five to seven years," she says.

According to van Hien, "their equipment is incorporated into a well-diversified range of products, including analytical test instruments, advanced semiconductor fabrication technology, and surgical robots, all of which are sectors with long-term growth prospects."

Favorite stock by asset value among UK small-cap investment trusts.

These three companies do not have the highest net value of assets held by UK small cap investment trusts, despite having the most trusts holding them.

The XPS Pension Group (LON:XPS) deserves that recognition. Although only six of the 22 trusts in the AIC sample held them, those six had a total asset value of 93.06 million. The average stake of the eight trusts that owned XP Power was 7.5 million, whereas the average stake of the trusts that owned XPS Pension was almost twice as high, at 15.5 million.

A pensions consultant is XPS Pension. A manager who supports the company, Brittain, says, "We think the company is well positioned to benefit from regulatory changes necessitating increased demand for advice from pension schemes."

According to Brittain, "XPS is also benefiting from the enormous 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." She also emphasizes how its recent acquisition of Polaris Actuaries and Consultants provides a path for future expansion through the insurance consulting industry.

For small cap investing, why are investment trusts a suitable vehicle?

As active funds, investment trusts have a professional manager (or group of managers) choosing which assets to hold. This implies that the people managing an investment trust can actually examine their investments, especially smaller businesses, as Brodie-Smith points out.

For investments in relatively illiquid assets, such as small caps, the investment trust model works especially well.

According to Brodie-Smith, "investment trusts are particularly suitable for investing in smaller, less liquid companies,". Since their fund managers are never forced to sell, they are able to take a long-term view of their portfolio.

Because investment trusts are closed-ended funds, they are initially created with a finite number of shares that trade on stock exchanges regardless of the assets they own.

Investment trusts may therefore trade at a premium or a discount to their net asset value (NAV). This contrasts with open-ended funds, such as exchange-traded funds (ETFs).