Fund Profile

Disclaimer

Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

Overview
A new version of this profile is available. View Latest
Overview

River and Mercantile UK Micro Cap (RMMC) aims to achieve long-term capital growth from investment in a diversified portfolio of UK micro-cap companies, typically comprising companies with a market cap of less than £100 million at the time of purchase.

The company launched in December of 2014, and now has George Ensor at the helm who took over the portfolio from Philip Rodrigs in 2018. The team utilise an active, bottom-up strategy looking to add real value in the micro-cap end of the market via in-depth analysis where coverage is sparse. Like all managers at River & Mercantile, George follows the group’s PVT (Potential, Valuation, Timing) investment approach.

As of the end of March 2019 the portfolio is relatively concentrated, with only 43 holdings, but the managers believe it boasts a well-diversified array of companies. Not only is the portfolio evenly split among the small to micro market cap spectrum, the companies are fairly evenly split among the sectors. Only financials has a weighting greater than 20%, and the largest sector overweights come from oil and gas (+8.2%) and health care (+6.2%). At the other end of the spectrum, the portfolio has very little exposure to consumer services and consumer goods (-11.3% and -6.4% relative to the benchmark, respectively).

Since launch the trust has delivered NAV returns of 96.2%, compared to 40% for the Numis SC Plus AIM ex Invt Cos Index, 60% for the AIC peer group and 60.4% for the IA peer group. As such, the long-term track record is strong. However, the last quarter of 2018 hit the portfolio particularly hard and saw the company fall 21.7% in NAV terms.

As with most UK focused trusts, the past few years have seen the discount widen dramatically – although in this case, exacerbated by the change in manager in early 2018. Over the past two years the trust has reached a premium of close to 17%, and a discount of close to 15%. Currently the trust is trading at a discount of around 14%, considerably wider than the sector average.


Kepler View

Since the launch of the trust in 2014, RMMC has performed strongly, outperforming peers and the benchmark alike. However, since the change in lead manager times have been tougher, mostly due to factors outside the company’s control, but partly due to poor stock selection.

We like the fact that the manager takes a punchy approach, yet keeps risk down through diversifying among growth opportunities. This has been reflected in the trust’s beta of just 0.58 and the fourth lowest standard deviation in the 20 strong UK Smaller Companies investment trust sector (since George took over the portfolio).

Having gone from trading on a very hefty premium only a year and a half ago, the trust is now trading a discount of close to 15%, offering a clear opportunity for investors. Should we see some of the pessimism surrounding the UK subside, and George continue running the trust in a similar fashion to Philip, there is little reason for the discount not to narrow.

Bull
Bear
Strong performance since inception
New manager has yet to outperform the benchmark and peers
Extremely wide discount relative to peers and history
Pessimism continues to surround the UK
Specialist mandate that suits the investment trust structure
Relatively expensive OCF
Continue to Portfolio

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.