Goodhart Global Smaller Companies

An index and style-agnostic global equity strategy focused on smaller companies with the potential for exceptional upside over a 10 year horizon. The objective is to generate significant capital appreciation that outperforms broad global equity market indices over the long term.

Goodhart: where belief, behaviour and capital align 

After two decades at Fidelity and Capital Group, two of the most respected institutions in asset management, I made a deliberate decision to do something different. Joining any new business is about finding the right fit. What has genuinely impressed me since joining Goodhart Partners is how closely belief, behaviour, and capital are aligned. This is a firm built around a small number of focused strategies, run by respected, experienced and high quality investors who invest alongside clients and who prioritise long-term outcomes over short-term asset gathering. That alignment is rarer than you may think and it’s a major factor in why I am thrilled I made the move.  

With that foundation in place, I have recently launched a global small-cap strategy with a singular focus: to systematically identify and invest in the next generation of companies we believe will deliver exponential growth – “multi-baggers”.  We aim to maintain a portfolio of approximately 50 holdings, with an intended investment horizon of five years or more. We have a high conviction in, and are enthusiastic about, the quality of the companies currently held. 

Richard Tennant, Lead Portfolio Manager, Goodhart Global Smaller Companies.

Quarter 4 2025 update 

Since inception on 6th November 2025 to year end 2025 the strategy returned –0.68% (GBP R Inc Share Class). 

• The fund has now been live for almost two months, with encouraging early performance. The portfolio holds around 50 companies and our aim is to identify companies that, based on our internal analysis, we believe could support long-term compounding in the mid-teens or higher. 

• We invest across a range of strategies, all centred on companies undergoing meaningful structural change. However, our sweet spot is deliberately unglamorous: businesses that may look “boring” from the outside, but benefit from scale, density (the hardest barriers to displace) and that can utilise their flywheel to generate exceptional upside over the long term. 

• Today, the portfolio exhibits the characteristics we look for: double-digit revenue growth, margin expansion, CFROI above 20%, and a mid-teens earnings multiple. It is also well balanced across growth, quality, and value factors and diversified across industries and geographies. 

• Risk management is central to how we invest. Every company in the fund is profitable, free cashflow generative, and selected with a focus on downside protection and clarity of outcome, both at entry and in determining position size. 

  
  

We firmly believe that small caps are a genuinely attractive place to invest and that they have been for a very long time, as illustrated by the following data points. 

• Supportive data: $100 invested in the Dimensional US Small Cap Index in 1927 would be worth $6.6m today vs $1.6m in the S&P500.  

• Structural reasons for outperformance – Small caps tend to be earlier in their life cycle, with longer runways of growth. They are less well researched, more frequently misunderstanding and more likely to benefit from strategic change or acquisition.  

• A fertile hunting ground - High dispersion of outcomes and low research coverage create ideal conditions for active investors who can genuinely generate alpha. 

The graveyard effect: where value goes to die 

Worse still, parts of small cap can often become the graveyard of public markets. c38% of small cap companies destroy value over five years. They share the same traits: no growth, falling margins, and chronically poor returns on capital. Together, they drag the asset class down by nearly 900 basis points a year. Anyone investing passively or tethering themselves to the benchmark ends up owning the dead weight. 

Our solution: can we build a framework to systematically identify these rare companies that truly make a difference? 

As a result, we have conducted an extensive research project analysing every company globally, over 100 years, going back to the 1920s, that delivered a 10x return over a ten-year period. We have built a proprietary library of the qualitative and quantitative characteristics that matter most, supported by hundreds of case studies, academic research, and insights from experienced investors. This framework guides us toward the small subset of companies with exceptional upside; not speculative bets, but repeatable patterns: growth inflections, scalable economics, strong cash generation and the ability to reinvest capital at high returns. 

In short, our view is simple: 

• Small caps are a fantastic place to invest. 

• Today is an especially interesting moment to be there. 

• But to succeed, you have to do things differently. 

  
  

Currently the cyclical backdrop is unusually attractive 

Global small caps have lagged large caps for most of the past seven to eight years. The dominance of the largest technology companies—the “Magnificent Seven”—has been a powerful force, but cycles turn. Historically, periods of extended underperformance have created fertile conditions for future returns. We believe we are now close to that turning point. 

[1] Goodhart, UBS HOLT. Analysis based on combined iShares MSCI World and MSCI World Small constituents, ranked by free-float adjusted market capitalization within each country. The small-cap threshold is defined as the 85th percentile of market capitalization by country, consistent with MSCI methodology. *The analysis covers the period from 31/12/1976 to 31/12/2024. Market-cap groups are determined annually: the top 70% of cumulative market capitalization are classified as large caps, the next 15% as mid caps, and the bottom 15% as small caps. Returns calculated in local currency. Back-tested/simulated data is for illustrative purposes only and does not represent actual performance. Past performance is not a reliable indicator of future results.  

[2] Goodhart, UBS HOLT. *Analysis based on combined iShares MSCI World and MSCI World Small constituents. Statement based on median return of 5.8% and 15.0% of small cap universe and small cap universe excl. detractors respectively. Perfect foresight analysis uses historical data to calculate “forward” Goodhart Partners | 10 total returns at each start date (t0) based on future outcomes that are known with hindsight. 1Median 3-year trailing CFROI at t5. 

[3] Source: Kenneth French, https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html#Research