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We have been patiently waiting for smaller companies to shine, hidden as they have been, behind their bigger siblings. Silently, things are beginning to change.

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We have written before about the “picks and shovels” necessary to assist with the continued expansion of AI and now we can begin to see this come to light in the insatiable demand for chips, power and electrical infrastructure that is necessary to run these machines. As such, the AI boom relies on a vast ecosystem of specialist companies, many of which are much smaller than the household names grabbing the headlines. The rapid growth in computing demand has accelerated the installation of high-speed fibre-optic networks connecting servers within data centres. As processing power increases, so do server temperatures, creating a need for more advanced cooling technologies. At the same time, the substantial energy requirements of these facilities are driving a significant build-out of electrical generation, transmission, and grid. Smaller-cap suppliers with products that can meet these demands have seen explosive growth in revenues.

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One might think that interest rates higher for longer and inflation pressures would harm such companies, but in fact not all small companies are vulnerable to inflation as many operate in niche markets with strong competitive positions enabling them to pass on increased costs to protect profit margins. In any case the market may believe that any hike in interest rates is limited which helps to reduce uncertainty. Many are domestically focused and derive revenue from local economic activity rather than global trade. Strong employment, particularly in the US, and resilient consumer spending have supported many companies’ valuations.

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The Global Smaller Companies Trust managed by Nish Patel of Columbia Threadneedle is one of the investment companies we use within this sector. Founded in 1889 it has £873million in AUM* and invests across 40 countries. It is up +23.68%* over the last year and is currently trading at a discount to NAV of -5.22%* but has been as high as -14%* between 2024/25 when the sector was less favourable.

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In addition to the AI benefits outlined above, the fund has found positive results in the aerospace and defence sectors via its holding in Curtiss Wright, a US based firm founded in 1929 by aviation pioneers Glen Curtiss and the Wright Brothers. The firm develops, designs and builds highly engineered, mission critical components for the sector making propulsion systems, electronics and pumps. Other successful companies that have contributed to the fund’s returns include Advanced Energy Industries, a producer of electrical components that focus on power conversion and Standex International, a firm that specialises in engineering technologies. Overall, North American firms produce some of their best returns which slightly puts paid to the US dissenters who persist in telling people to reduce exposure to North America. As we have maintained, it is not where a business is listed, but what it does.

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UK companies made some significant contributions, including from Oxford Biomedica, that focuses on cell and gene therapy, as did Furuno Electric of Japan that manufactures marine equipment.

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What this all shows is how well diversified the fund is, not just by region, but in the many very different and brilliant smaller and less well-known companies that they invest into. We don’t hear enough about them.

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*FE Analytics 29/05/2026

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Comments from James Scott-Hopkins, Founder, EXE Capital Management.

The views are those of the author only.

The above does not constitute a recommendation to buy the fund and advice should be sought from your financial advisor as to the appropriateness of this fund in your portfolio. The value of investments can fall as well as rise. Past performance is no guarantee of future returns.‍

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