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By Mark Dampier, Head of Research, Hargreaves Lansdown

River and Mercantile is one of the new breed of boutique investment houses that is taking the investment world by storm.

The managers are part owners of the firm so their financial future is tied to the success of their funds. Their stakes in the firm also means they are less likely to join the fund manager merry-go-round, offering investors the peace of mind that the managers they choose today should remain in charge of their funds for the foreseeable future.

River and Mercantile are launching two UK funds and it is their UK Smaller Companies Fund which has particularly grabbed our attention. It launched on 30 November and is a spicier offering managed jointly by Dan Hanbury and Richard Staveley.

The recruitment of Dan Hanbury from Investec was a great coup for the firm. He is renowned for unearthing small and growing companies. Richard Staveley joined from SGAM and he too has built a track record of outperformance in this sector, but please remember that past performance is not a guide to the future. They will also be able to draw on the expertise of Hugh Sergeant, who will be managing their UK High Alpha Fund.

It is a close knit team, the managers have complementary styles and they have created an investment process which we believe will bring out their best qualities. They are not bound by rigid rules and their flexible approach allows them to run with the winners in the portfolio. This mean they will not automatically sell a share if it grows into a medium sized company. They will look to capitalise on every opportunity, which may include some medium sized companies or attractive AiM companies.

The fund itself will be a well-diversified portfolio of 60 to 100 holdings. The number of holdings will depend on prevailing market conditions and the number of promising shares the managers find in the market.

Smaller companies are higher risk, but there is the potential for high rewards, so you need to invest with managers you can trust. We believe Dan Hanbury and Richard Staveley are amongst the best in the sector and investors have the chance to invest in this new fund at launch. River & Mercantile will also close the fund to new investment before it becomes too large and, given the fund managers track record, the fund is sure to attract the attention of more experienced investors.

You can apply for the River & Mercantile UK Equity Smaller Companies Fund on our website with a debit card a receive a saving of 5%. Alternatively you can download application or transfer forms for ISAs, PEPs, SIPPs and our Fund Account - just visit our website.

The Fund of the Month is written by Hargreaves Lansdown. An independent broker offering unit trust, stockbroking, pension and investment services.

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