Miton UK MicroCap (MINI) is a £69m investment trust offers investors a domestically-focused and differentiated portfolio invested in the smallest companies in the UK.
MINI was launched in 2015 in anticipation that globalisation would cause political upheaval, and on the assumption that microcaps were set for a revival. The managers pride themselves on the portfolio being unlike any of the major indices, or the other smaller company trusts in the sector for that matter, with an active share of almost 100% to the FTSE All Share.
Stock-specific risk is spread via a wide range of relatively small holdings, and currently the portfolio has 120 holdings, of which the top ten make up close to 30% of NAV. This diversification is an important part of the approach at MINI, with moderated risk and managing downside volatility being key characteristics of the trust. To that end, the investment process focuses on meticulous fundamental analysis and on entering companies at attractive valuations.
Since inception of the trust performance has been varied, as discussed in the performance tab. With this said, it has been an exceptionally difficult period for UK smaller companies managers, and even more so in the micro-cap space. However, with this brings the current discount of 6.4%.
Miton UK MicroCap looks like very little else in the AIC UK Smaller Companies sector, offering investors exposure to some of the smallest and most exciting opportunities within the UK. With companies as small as £2m on the books, MINI has the potential to deliver premium returns vastly in excess of peers. As we continue to see world growth slowing, it is possible that the mainstream indices will moderate their growth too, while the companies that MINI invests in have the capacity to continue their growth regardless of the wider economic cycle.
Alongside this, the trust can be a useful tool for investors looking for diversification from mainstream trusts and funds. Major sectors within the mainstream indices are often replicated across many developed markets, and the benchmark agnostic portfolio construction of Gervais and Martin means the trust has an active share of close to 100% relative to the FTSE All-Share Index.
While the trust’s small size and highly specialised mandate might not appeal to all investors, we think this philosophy, and Gervais' record of making the right calls – Gartmore Irish Growth in its early days being a prime example – make this an interesting time to consider the trust. Currently trading at a discount of 6%, the discount has narrowed considerably over the past few months. We believe this is only likely to continue as global growth slows and fundamentals driven investing, as opposed to a pure growth focus, begins to come back into fashion.
|Unique and differentiated investment approach||Reasonably high OCF
|For investors who currently hold mainstream funds, the trust offers a real chance to diversify their portfolio||Illiquid underlying holdings|
|The manager has a history of correctly predicting long-term economic trends|