New Select 50 option - US Smaller Companies

In the last few weeks there has been growing evidence of a change in market leadership. Until recently, returns had been dominated by a handful of large US tech stocks, but since the end of June it has been the small caps that have outperformed.¹

If this trend were to continue then a likely beneficiary would be Brown Advisory US Smaller Companies. It is a new addition to Fidelity’s Select 50 list of handpicked funds and one of a number of changes introduced as part of the latest quarterly update.

Why invest in US small caps?

Investors who include an appropriate allocation to US small cap stocks in their portfolio may be able to achieve greater diversification, as well as potentially better long-term returns. This is because many of these companies are able to grow faster than their larger rivals and the two areas typically have a fairly low correlation.

Small cap stocks tend to be under researched, which can create opportunities for skilled stock pickers to add value. There is also a large universe of around 2,000 to select from in the US, with many operating in different industries to the larger names that we are all familiar with.²

Objective and approach

Brown Advisory US Smaller Companies has a quality-growth approach, with the managers putting together a fairly concentrated portfolio of 50 to 80 of their best ideas. The firm is well-placed to operate the strategy as it is based in the States and has an extensive team researching and investing in this part of the market.

Lead manager Chris Berrier aims to generate outperformance by identifying well-governed companies with durable growth prospects that can scale in the near future. His selections are then held for long periods of time to outlast other less patient investors.

Strong long-term performance

From inception in November 2007 to the end of July 2024, the fund generated an annualised return of 8.6%, compared to the 8.2% produced by its benchmark, the Russell 2000 Growth index. It is important to take a long-term view though, as it is capable of double digit gains and losses in any 12-month period. Please remember past performance is not a reliable indicator of future returns.³

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. This fund invests in overseas markets and so the value of investments can be affected by changes in currency exchange rates. This fund invests more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies. This fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.