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
Specialising in the very smallest UK listed companies, MINI can provide a differentiated source of growth…
Overview

Miton UK MicroCap (MINI) was launched in 2015 to invest in the UK’s smallest listed companies, typically AIM-listed stocks with market capitalisations of less than £150m. The strategy focusses on generating capital growth, the managers Gervais Williams and Martin Turner looking for companies that are positioned to generate substantial surplus cash in excess of market expectations in the near term.

As discussed in Portfolio, the trust itself was launched to take advantage of major global economic and financial trends that Gervais and Martin believe will reverse the trend in highly rated, large growth stocks outperforming and favour smaller, cash generative, attractively valued stocks. The managers believe that the UK AIM market offers a wide opportunity set of genuinely small companies with the capacity to grow substantially.

Although the macro trends forming the raison d'être of the strategy have yet to play out, global returns still being dominated by highly rated large-cap growth stocks, MINI has performed well, beating the FTSE AIM All-Share Index and matching the returns of its peers in the UK Smaller Companies sector over a period that did not favour its value-orientated style. As reviewed in Performance, some outsized returns in 2020 and 2021 versus peers and benchmarks have hinted at the potential gains MINI offers if the underlying thesis of Gervais and Martin plays out.

MINI currently trades on a discount of c. 7.4%. The trust offers an annual redemption scheme that limits the potential impact of the Discount on trust shares for investors that wish to redeem and are willing and able to wait for the redemption date as set by the board each year.

Analyst's View

MINI is a strategy predicated on the contrarian worldview of the managers, Gervais and Martin, who predict that the reversal of decades-long trends in globalisation, declining interest rates and the expansion of cheap credit will flip the dynamics of equity markets, seeing small value stocks outperform the highly rated mega-cap stocks that have dominated markets for many years. Gervais and Martin argue their case persuasively and passionately. However, even if an investor does not entirely agree with the managers’ weltanschauung, the UK microcap sector offers a set of highly differentiated opportunities and could act as a diversifying source of returns for an investor. The ability of microcap companies to grow in a stagnant economic climate could prove useful.

MINI does have some potential drawbacks for investors, it is focussed on generating capital gains, so does not provide much income, and microcaps are an inherently volatile asset class that are particularly sensitive to liquidity conditions in markets. However, for a risk-tolerant investor without an income requirement, the potential for growth from MINI is attractive, and the focus of Gervais and Martin on cash generation, the general avoidance of Gearing and highly speculative stocks and the use of portfolio protection do mitigate some of the risks of the asset class. The annual redemption facility also provides some comfort that an investor’s capital will not be trapped behind a deep and persistent Discount if sentiment towards the trust turns negative.

Bull bear
Microcaps provide returns less dependent on global growth
Microcap stocks are substantially more volatile than larger cap peers
Annual redemption facility provides backstop for investors being impacted by discount
Charges are above average for sector
Use of portfolio insurance can assist recovery from market drawdowns
Costs of portfolio insurance will be a drag on performance in bull markets
Continue to Portfolio

Fund History

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...
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