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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) provides investors with rare exposure to the exponential growth potential on offer at the very smallest end of the UK equity market. As discussed in Portfolio, the strategy is less correlated to the market than typical large-cap focussed UK equity strategies, with 77% allocated to the more obscure AIM market. Additionally, the average market cap is £56m, significantly lower than the £412m average of the Numis Smaller Companies ex Investment Companies Index. MINI is managed by longstanding UK equities specialists, Gervais Williams and Martin Turner, who aim to minimise stock specific and sector risks associated with the investment universe through diversification across a wide range of sectors and 140 holdings.

As discussed in Performance, MINI has demonstrated how high-quality micro-caps can generate exceptional performance in the right environment compared with the mainstream stock market indices. For example, MINI generated a NAV total return of 277% between March 2020 and May 2021 compared to a 29% total return from the FTSE 100 Index. More recently, outflows from domestic investors have impacted UK equities’ share prices, particularly at the smaller end of the market cap spectrum where international investors have been less inclined to offset the outflows. However, Gervais and Martin argue that tougher economic conditions may favour the cash compounding characteristics of UK equities and given the significant underweight allocations and unusually low valuations across the micro-cap universe, they believe there may be a longer-term opportunity for the higher-quality, cash-surplus generating companies with attractive corporate prospects to thrive.

MINI’s 8.0% Discount is slightly wider than its five-year average. Historically, discount volatility has been lower than the peer group and shares have traded closer to NAV, enhancing liquidity and helping to maintain shareholder value. The board offers an annual voluntary redemption facility for all shareholders.

Analyst's View

It’s difficult to believe that small- and micro-cap UK equities have much further to fall. Although there are always risks associated with small- and micro-cap investing, we believe the strong performance of several stocks in MINI’s portfolio, including Yu Group which has risen over ten-fold over the last three years to mid-August 2023, highlights the potential asymmetric returns that can be achieved. With inflation sticky and the cost of debt higher than it has been over the last decade, the strength of a company’s management team and ability to allocate capital effectively, alongside high customer satisfaction ratings, may be able to help dampen margin pressures. Given the attractiveness of valuations and underweight allocations to the UK and the sector, there may be opportunities for surplus cash-generating companies to acquire debt-free businesses at knock-down valuations, which could boost returns in the sector.

We believe MINI offers investors a genuine diversification opportunity that should complement an investor’s more traditional exposure to more highly valued, large-cap focussed strategies which may be vulnerable to a price correction. Over the long run, in our view, the relatively low levels of discount volatility and the voluntary annual redemption facility ensure shareholders can buy and sell relatively close to par which enhances the risk/reward characteristics of the strategy. Although the environment may remain challenging for MINI and the sector in the short term, Gervais and Martin’s diversified allocations across sectors and holdings means they are well positioned to manage the risks and capture a shift in investor sentiment should it occur. That said, in recent weeks, MINI’s NAV has made strong gains while the share price has been muted. This could prove to be the beginning of a rebound, with the potential for a narrowing discount to add to returns.

Bull

  • Less correlated exposure to large-cap focussed equity strategies
  • Voluntary annual redemption facility ensures shareholders can sell shares close to par
  • Opportunity to generate very high returns given the cheap valuations of UK micro-caps

Bear

  • Micro-cap focus leads to relatively high volatility
  • OCF of 1.72% is above average for the sector
  • Strict ceiling on the size of the portfolio may limit long-term growth potential
Continue to Portfolio

Fund History

16 Feb 2024 Fund Analysis
MINI’s managers believe the prospects for the strategy are the best they have been for 30 years…
14 Dec 2023 Results analysis: Miton UK MicroCap
MINI’s managers argue there is option-like upside in their micro-cap portfolio…
01 Nov 2023 Back to basics
Higher rates mean re-visiting portfolio construction...
24 Aug 2023 Fund Analysis
MINI’s managers aim to exploit extreme value in UK micro-caps…
11 Jul 2023 Results analysis: Miton UK MicroCap
MINI’s portfolio of micro-caps is trading on deeply discounted valuations…
06 Apr 2023 Fund Analysis
MINI’s portfolio is unusually cheap…
15 Dec 2022 Results analysis: Miton UK MicroCap
MINI’s unique investment process may uncover some good value in an otherwise uncertain environment…
16 Nov 2022 Bottom fishing
What can history tell investors about calling the bottom of a market?
11 Nov 2022 Called it
Some managers predicted we’d end up with the chaos we have today – but will they still perform well?
28 Sep 2022 Mind the gap
While chaos reigns in the short-term for markets, some investors see a growing disconnect between prices and reality...
28 Sep 2022 Slides and Audio: Miton UK MicroCap
Download the presentation and listen to the audio from our 'Growth at an unreasonable price' event from 23 September...
15 Sep 2022 Fund Analysis
MINI’s share price discount could offer a long-term entry opportunity…
31 Aug 2022 Growth at an unreasonable price
Growth has taken a beating as inflation fears have soared, but the tide may be turning and we have six speakers at our next event ready to tell us why…
10 Aug 2022 Get ‘em while they’re hot
Wide discounts in the UK Smaller Companies sector may present long term investors with good entry opportunities…
20 Jul 2022 Results analysis: Miton UK MicroCap
MINI’s share price discount could offer a good long-term entry opportunity…
17 May 2022 Podcast: How small caps will benefit from deglobalisation
Kepler's David Kimberley meets small cap veteran Gervais Williams for our first ever podcast...
16 Feb 2022 Perfectly formed
Our research suggests that investment trusts really are a better way to gain exposure to smaller companies…
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…
30 Dec 2021 Fund Analysis
Specialising in the very smallest UK listed companies, MINI can provide a differentiated source of growth…
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...
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...
16 Apr 2020 Sea-change
Join smaller companies specialist Gervais Williams for a live Q&A to find out why, in the face of collapsing markets, small caps are in a uniquely strong position to perform...
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
Launched in 2015 in anticipation of a post-globalisation pushback, Miton UK MicroCap invests in the smallest UK listed companies...
05 Nov 2018 Do politics matter?
With the pivotal US mid-terms looming, politics are front of mind for many investors - but should they be?
12 Sep 2018 Fake news...
Small cap funds, despite their reputation to the contrary, are less volatile and have delivered better risk adjusted returns than their large cap peers...
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?
25 Oct 2017 Patience is a virtue…
We analyse the outperformance of UK small-caps and why it has been so important to take a long-term view...
13 Sep 2017 Big Issue(rs)
We highlight the UK equity trusts that have issued and bought back the most shares over the course of 2017 so far and how these actions have affected shareholders...
12 Sep 2017 Fund Analysis
A UK equity trust run by a highly-experienced team that invests in stocks with market capitalisations of less than £150m...
View all

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