Onward Opportunities (LSE: ONWD), a UK smaller companies and micro-cap investment trust, has drawn attention for its high fee structure despite a solid but unspectacular performance record. The trust, which listed on Aim in 2023 and graduated to the main market this year, has grown its assets from £12.8m to £42m through several follow-on raises.
Managed by Laurence Hulse, formerly of Gresham House, the trust targets an annualised return of at least 15% and aims to double invested capital within three to five years. Over the past three years it has delivered an 18.5% share-price return and a 26% net asset value (NAV) return — outperforming the UK Aim All-Share index's 8.4% total return but falling short of its own 15% annualised goal.
The fee structure, however, has raised eyebrows among analysts. Onward charges a management fee of 1.5% of NAV up to £50m and 1% above that, plus a performance fee of 12.5% of excess returns above a 6% non-compounding hurdle. This has pushed ongoing charges to 4.4% in 2024 and 5.2% in 2025 — nearly five times the weighted average for its AIC UK Smaller Companies peer group and 2.5 times higher than Rockwood Strategic, which returned 56% over three years.
The trust holds a concentrated portfolio of ten core positions and 12 smaller 'nursery' holdings. Its top two holdings are floor coverings distributor Likewise (9.5%) and fishing equipment retailer Angling Direct (8.3%). Onward has taken an activist approach with Angling Direct, urging management to refocus on its app and social channels rather than loss-making European expansion. A recent addition is pottery firm Portmeirion, where the trust is betting on new CEO Michael Scheepers, formerly of Le Creuset, to turn the business around.
For UK households and investors, the trust's high charges mean that even when it outperforms its benchmark, a significant portion of gains goes to the managers rather than shareholders. The Bank of England's interest rate decisions continue to influence the small-cap sector, with higher rates historically pressuring smaller companies' borrowing costs. The FTSE 100 has shown relative stability, but smaller indices such as the Aim All-Share remain volatile. Savers and mortgage holders should note that investment trusts carry specific risks, and past performance is no guarantee of future returns.