The fund, which is managed by FE Alpha Manager Giles Hargreave (pictured), is now more than £500m in size, having grown by 44 per cent since January 2012 and it now has roughly one-third of its assets in the FTSE 250. The IMA considers any company up to £1bn market cap to be "small", meaning that many FTSE 250 companies fall into this category and the fund is well within the limit of having 80 per cent in "small" companies.
However, Rob Morgan, analyst at Hargreaves Lansdown, says that the nature of the fund has been changing and Hargreaves is keeping an eye on the situation.
"The fund probably wouldn’t have had any mid cap exposure in the past," he said.
"We are not immediately concerned, but you need to keep an eye on it to ensure the manager is still able to invest with the strategy that has brought him success."
"We will be asking the team about any plans to soft-close it every time we see them from now on."
Marlborough Special Situations has the second-best record of any IMA UK Smaller Companies fund over 10 years, with returns of 599.13 per cent.
The average fund in the sector has made less than half that, at just 273.41 per cent, according to data from FE Analytics.
Performance of fund vs sector over 10yrs
Source: FE Analytics
The fund has made 80.12 per cent over the past three years in a strong period for smaller cap companies, but Morgan warns that it may have to change its style if inflows and gains continue at the same rate.
"It is a worry. A similar thing happened on the Standard Life UK Smaller Companies fund, although to be honest it has not done the manager [Harry Nimmo] any harm at all."
"Nimmo has a lot of mid caps because he’s running winners [that were previously small caps], which is what I think Giles is doing. I’d expect it to be successful for him as well."
"However, it’s true that Marlborough Special Sits isn’t the same fund now as it was five years ago. It was a pure small cap growth fund, and now it has a slug of mid caps as well."
"I think investors have to be aware that it’s not the same fund as it was, but that doesn’t mean I wouldn’t back it to keep performing strongly."
"You can always buy Hargreave’s micro cap growth fund if you want small cap exposure as well, or a different small cap fund."
Will Searle, analyst on the fund, says that the growing amount in mid caps is down to the team’s successful stock-picks doing well and growing in size rather than the team changing strategy and picking mid caps.
"Some of the holdings have obviously done very well and that’s the reason why," he said.
"Elementis, for example, we started to buy at £1.50 and it’s now £2.30, and that’s over a billion now [in market cap], so there’s a few examples like that of positions we’ve held for a few years."
"Giles tends to run his winners but what keeps the size of the positions in check is that he doesn’t let them get above 3 per cent, they are normally about 2 per cent."
Standard Life UK Smaller Companies soft-closed in 2011, having reached £1.1bn in size, and the Marlborough fund is only half that.
However, Morgan says it is hard to put a figure on how big is too big.
"When you ask a manager, they always say double where the fund size is now. I wouldn’t put a figure on it as it will depend on market conditions, but it is something investors in the fund should bear in mind."