Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Miton UK MicroCap. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

Miton UK MicroCap (MINI) aims to provide shareholders with capital growth over the long-term. Managed by Gervais Williams and Martin Turner, MINI typically focusses on investment in companies with market capitalisations of less than £150m, usually listed on the AIM market.

As discussed under portfolio, MINI was launched in 2015 with a view to positioning an investment vehicle for the longer-term cycle that the managers perceived to be in the offing at the time. There is a deep underlying theme running through the structure of the trust, emphasising a reversal of many of the economic trends of the past three decades. Ultimately the managers expect this to result in reshoring of businesses, rising wage inflation and a change in market leadership.

They note that the UK market offers a hugely attractive subset of micro-cap companies which stand to benefit from precisely such a scenario. Operationally, many of these companies have, and will likely retain, relatively endogenous drivers of growth. Yet, as noted under portfolio, Gervais and Martin believe these companies are often ignored and that there is a large opportunity set in financially robust companies.

As discussed under performance, MINI is by a significant margin the strongest performing trust in its sector over the 12 months to 15/03/2021. Yet the managers believe we are only in the foothills in a substantial market rotation that should provide them with further tailwinds going forward.

Despite the exceptional performance, MINI remains on a discount of c. 8.6% (as at 15/03/2021). The board offers a redemption facility annually, which allows shareholders the opportunity to exit at or close to NAV.

Kepler View

MINI is a portfolio constructed with a specific outlook (discussed under portfolio) and designed to reflect the optimal manner in which to invest should that outlook materialise. We have significant sympathy for this big picture outlook, though the enormous consequences of breaking out of a 30-odd-year cycle and the heuristic bias of the market is likely to mean that relative returns will encounter some near-term volatility as investors waver over the durability of the new direction.

Yet we agree MINI’s process, built to capture these opportunities over the long-term whilst managing short-term risks, is well-suited to the task. The massive outperformance already enjoyed by MINI investors in recent months is, we would say, a validation of the argument that even small rebalancing of portfolios into this area can cause outsized returns due to the illiquid nature of the market. And yet, MINI’s portfolio remains on a discount to the wider market.

Despite the focus on ensuring there is a margin of safety at the individual stock level, we think shareholders should be prepared for volatility; as we discuss under discount. The volatility that can arise in times of market stress from the illiquidity of the underlying portfolio is often matched by volatility in MINI’s discount. However, we think the redemption facility should serve to anchor the discount over the long-term.

bull Bear
Highly differentiated investment proposition
Underlying thesis may yet face further challenges, with likely knock-on effects
Compelling structural growth opportunity which has started to see validation
Charges are above average for sector
Current discount level looks highly attractive, and annual opportunity to exit at or near NAV
The diminutive nature of the trust’s investment universe likely puts a ceiling on ultimate growth in assets


Continue to Portfolio

Fund History

30 Dec 2021 Fund Analysis
Specialising in the very smallest UK listed companies, MINI can provide a differentiated source of growth…
30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
30 Jun 2021 Inflation – a real threat or hot air?
Two of our analysts ask whether recent high inflation numbers indicate something long-lasting and troubling is happening…
05 May 2021 Vive la revolution
For thirty years quality has had a structural tailwind; but revolt is in the air and value is on the barricades…
07 Apr 2021 Fund Analysis
After an exceptional 2020, MINI may yet have further to go…
24 Mar 2021 Shoot to Thrill: ISA targets for long term growth
We all intend to invest for the long-term but can often be distracted by the news...
10 Feb 2021 Eye of the Pfizer
Mining shares have rallied in recent months. With further potential, what impact could this have on the relative returns of active UK Small cap strategies...
14 Oct 2020 Fund Analysis
MINI is the strongest performing UK Smaller companies trust in 2020…
06 May 2020 The fight in the dog
We look at the characteristics which have separated the winners from the losers among small-cap trusts in the current crisis, with some surprising results...
05 May 2020 Large vs small
Equity markets are pricing in continued large-cap outperformance. Will this continue?
30 Apr 2020 Talking Trusts - Gervais Williams, Miton UK MicroCap
Earlier this month, we hosted a webinar and live Q&A with Gervais Williams - watch the video and hear the audio here...
02 Oct 2019 Fund Analysis
Based around a clear macroeconomic view, MINI offers investors exposure to some of the most exciting opportunities within the UK…
11 Sep 2019 Nanny knows best: how regulation is influencing returns
New research suggests disruption is threatened by increased regulation, with clear consequences for investment strategists...
04 Jul 2019 An industry icon
Stalwart of the investment trust sector Gervais Williams explains how a three decade history with trusts has informed his thinking...
19 Feb 2019 Fund Analysis
Miton UK MicroCap is quickly becoming one of the most attractive vehicles to the UK small cap market...
12 Sep 2018 High flyers
Our research shows small-cap managers adding consistently more alpha, and regulatory change means this could be an attractive time to invest in the sector...
11 Sep 2018 Fund Analysis
Run by Gervais Williams and Martin Turner, Miton UK Micro Cap is a £102m investment trust that invests in the smallest companies in the UK...
19 Jun 2018 Pretty little things
Many smaller companies managers have been shifting into micro caps in 2018, should investors be following suit?
View all

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