Prospects for the Future: A new fund whose fees have not yet been proven

Is Onward Opportunities too costly for investors? It is one of the few investment trusts to have floated in the last three years, and it has a strong track record

Between 2023 and 2025, there were only three investment trust initial public offerings (IPOs), and none of them raised more than £100 million. While Ashoka WhiteOak Emerging Markets (LSE: AWEM) raised 30.5 million in 2023, the activist trust Achilles Investment Company (LSE: AIC) raised 54 million last year. They have both been adequately covered.

Of the three, Onward Opportunities (LSE: ONWD) is the smallest and least well-known, having raised 12.8 million through an Aim listing in 2023. It graduated from Aim to the main market this year and has since expanded to 42 million through multiple follow-on raises.

Onward Opportunities takes a targeted stance.

The goal of Onward, which targets micro-caps and smaller businesses in the UK, is to double invested capital over the course of three to five years and earn an annualized return of at least 15%. It has not yet achieved this objective, as evidenced by a share-price return of 18.5 percent and a total net asset value (NAV) return of 26 percent over a three-year period. Nevertheless, it has matched the performance of its peer group, the AIC UK Smaller Companies sector, and exceeded the UK Aim All-Share total return index (8.4%).

Laurence Hulse, who began working at Gresham House in 2015, is the trust's manager. Before relocating to Dowgate Wealth in 2022 to begin Onward, he worked on several equity funds, including Gresham House Strategic (now Rockwood Strategic (LSE: RKW)), the Strategic Public Equity Fund, and the Gresham House Smaller Companies Fund. Dowgate owns 33 percent of the trust, while Hulse and his group own 5 percent.

Ten core positions make up Onward's concentrated portfolio, with 12 smaller holdings (or 25% of the portfolio) that the team refers to as "nursery" positions. In addition to searching for lucrative, profitable companies, it seeks to take significant stances in circumstances where an activist approach can unlock value.

By the end of June, Likewise (9.5%) and Angling Direct (8.3%) were the top two holdings. Onward initially purchased Likewise, a UK distributor of mats, rugs, and floor coverings, in 2024. By stating that Likewise is well-positioned to outperform its "loss-making and heavily indebted rivals"whose ongoing decline is a crucial component of the thesisit strengthened its stance at the end of the previous year. Tony Brewer, the company's CEO and co-founder in 2018, previously worked at rival Headlam, where he increased the company's value tenfold between 2009 and 2015.

Since the trust's founding, one of its top holdings has been Angling Direct, a well-known UK retailer of fishing gear. In light of ongoing losses, Onward wants management to reevaluate the company's European expansion and instead concentrate on its app and social media platforms.

Portmeirion, a new nursery holding, is a pottery company. Despite the fact that the company has lost money in the last two years, Onward thinks Michael Scheepers, the new CEO from Le Creuset, can help move the business forward.

Opportunities for Onward are too costly.

The fees are fairly high, even though Onward is building a strong reputation in the small and micro-cap industry. Up to 50 million, the management fee is 1.5 percent of NAV; after 50 million, it is 1 percent. Additionally, there is a performance fee of 12.5 percent of the excess return over a non-compounding annual threshold of 6 percent. This reduces returns even though it encourages managers to perform better.

The performance fee and other ongoing fees reached 4.4% in 2024 and 5.2% in 2025. As a result, the trust is almost five times more costly than the peer group's weighted average and 2.5 times more expensive than Rockwood Strategic, which has generated a 56 percent return over a three-year period.

It's unfortunate that managers, not investors, benefit from performance. If the fees were removed, it would be an excellent performer.