Fund Profile

River & Mercantile UK Micro Cap 24 May 2019

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Disclosure – Independent Investment Research

This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.

Overview
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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.


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2022 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
09 Sep 2019 Fund Analysis
Negative sentiment toward the UK and a change of manager have left this trust on a discount of 20%...
24 May 2019 Fund Analysis
A highly concentrated trust with a strong track record since inception in 2014...
20 Mar 2018 Star struck
Star culture presents siginficant problems for asset management companies when top managers jump ship. We examine the steps some groups take to avoid them...
09 Mar 2018 Keep calm and carry on...
We examine the reaction of investment trust discounts amid recent market volatility...
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 Jun 2017 MAYDAY!
As the Conservative party founders, we examine the impact of last week’s disastrous election on trusts...
07 Jun 2017 Omnishambles...
Given the huge levels of political-induced uncertainty, we analyse recent drivers and themes within the UK equity market ahead of the upcoming election
25 May 2017 An opportunity in UK small-caps?
We round up recent recommendations, results and analysis of the latest developments in the UK small-cap sector...
04 May 2017 Size matters
We highlight the potential liquidity and capacity constraints that could hinder open-ended UK smaller companies funds...
04 May 2017 Fund Analysis
A top-performing UK small-cap trust, run by an experienced manager that is designed to limit potential capacity or liquidity related constraints...
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