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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
MINI’s managers believe the prospects for the strategy are the best they have been for 30 years…
Overview

The Miton UK MicroCap Trust (MINI) provides investors with access to the ‘unjustifiably low valuations’ and option-like upside of companies in the UK small- and micro-cap equity markets. Gervais Williams and Martin Turner have managed MINI since its launch in 2015, employing a bottom-up focused approach to identifying surplus cash-generating micro-cap businesses, trading at valuations below their perceived intrinsic valuation. The current 74% allocation to the AIM market provides diversification versus the typical UK equity portfolio, alongside a greater exposure to companies with exponential growth potential. For example, MINI’s largest holding, Yu Group, has delivered a 400% return since the start of 2022. That said, the portfolio is diversified across sectors and holdings to help minimise the impact of drawdowns and overall risk. MINI is not geared.

Tighter macroeconomic conditions and the unloved status of the UK equity market has made it challenging for MINI to generate consistent performance. However, Gervais and Martin believe the current moment is the best opportunity in 30 years and have been adding to their highest conviction positions. For example, CyanConnode was increased following a fall from 25p to 10p during a recent capital raise and came with a free 18-month warrant with an exercise price at 15p, multiplying its returns potential. Gervais and Martin also expect the compounding characteristics of UK equities to entice international investors looking for alternative investment opportunities as the era of globalisation subsides and growth proves harder to come by. They expect this to filter down to high-quality, surplus cash-generating smaller companies, leading to a return to the long-term trend of small-cap outperformance.

MINI offers an annual redemption facility. In November 2023, 18.7% of shares were redeemed, reducing the trust’s assets, leading to a rise in the OCF to a capped level of 2%. Historically, the facility has helped reduce discount volatility. However, MINI’s discount had widened out to 10.5% at the time of writing.

Analyst's View

In our view, MINI has been a victim of the tighter macroeconomic environment which has weighed heavily on investor sentiment towards microcaps. In addition, idiosyncratic factors have impacted the share price performance of some of its largest positions rather than a breakdown in the managers’ investment case. These include a delay in orders at CyanConnode and the Israel–Hamas conflict impacting MTI Wireless (see Performance section). We think that sentiment may be turning towards the UK small-cap market, and we remain optimistic that Gervais and Martin’s research process can uncover those companies that have strong fundamentals and surplus cash.

We believe MINI can provide a viable diversification opportunity away from more mainstream, internationally focused large-cap equity strategies, and with large caps having performed well in 2023, small caps could be due a catch-up. Should interest rate cuts come during the year, and inflows into UK equities pick up, the current discount may also provide a good long-term opportunity for shareholders. In our view, the best opportunity may not remain for very long if investor sentiment starts to shift, especially given the option-like recovery potential displayed by smaller companies in the past. That said, the significant redemption of shares over the past two years does mean high costs need to be borne at present.

Bull

  • Discount wider than five-year average
  • Micro-cap focus offers genuine diversification opportunity
  • Option-like returns potential of individual holdings

Bear

  • OCF higher than peers, although capped at 2%
  • Investors have redeemed significant numbers of shares reducing size of trust
  • Micro-cap focus can enhance volatility
Continue to Portfolio

Fund History

10 Apr 2024 Micro-managing
What opportunities exist in the smallest part of the UK market?
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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