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UK equity managers can still profit from peppering their sector allocations with small-cap bets, according to Royal London Asset Management.

Bradley Mitchell, manager of the £89.6m UK Growth trust, said he has allocated 10 per cent of the portfolio to small caps to support what he saw as crucial sector calls.

Over the year to 30 June, the fund lost 7.1 per cent against a UK All Companies average of 15 per cent and placed 21st out of 316 funds in the peer group.

During the same period, it went from holding 30.6 per cent in financials, 17.2 per cent in oil and gas and 10 per cent in basic materials to having 21.9 per cent in oil and gas, 17.2 per cent in financials and 15.9 per cent in basic materials.

Although the stock market dips and the resulting flight to quality have hit small-cap names, Mr Mitchell has persisted with a number of positions outside the FTSE 350 or listed on Aim.

"I did small caps for a long time," he said. "I'm not put off by doing my own research."

Examples in the oil and gas sector include Hydrodec, which recycles transformer oil, and Rockhopper Group, which has licenses to explore for oil and gas off the Falkland Islands. These supplemented Mr Mitchell's top two holdings, which, as of 30 June, were BP and Royal Dutch Shell.

Elsewhere in commodity-related areas, Mr Mitchell has bought into Pursuit Dynamics, which has developed a technology to turn liquids into mists.

Mr Mitchell said he mitigated the risk of investing in the company by talking to its customers in the food processing and ethanol industries and confirming that there was strong demand for its products.

Even in consumer areas such as education and publishing, where the fund has lower weightings, Mr Mitchell has complemented his holding in Informa - a large-cap takeover target - with a holding in small training provider BPP Professional Education.

Mr Mitchell's least successful holding recently has been Southern Cross Healthcare. On 30 June, after the mid-cap healthcare provider announced it would have to renegotiate its banking covenants , its stock price fell from a high of 335.75p to a low of 47.75p in just a few days.

"It was my worst individual day as a fund manager," he said. "It was my first day back from holiday, and I had the mother of all profit warnings."

But Mr Mitchell said with his more volatile holdings he blocked out the short-term noise and focused on whether the original case for investing had changed.