Rights & Issues (RIII)

Matt Cable, manager of Rights & Issues (RIII), takes a highly active approach to exploiting the inefficiencies at the lower end of the UK market cap spectrum to identify stocks with overlooked growth prospects and generate significant alpha over the long term by backing them with conviction in a highly concentrated Portfolio of just 20 to 25 stocks.

The UK small-cap space has historically been a rich hunting ground for active managers, and Matt’s processes uses a combination of factors to help identify ideas. Whilst predominantly bottom-up, the process involves a top-down overlay to help with decision making, as well as incorporating risk factors to help mitigate the trust’s exposures, which is conducted by Tim Service who supports the Management of the trust.

The concentrated portfolio means each holding can have a material impact on Performance. This has been evident in the past year, as M&A has been a notable feature in the market, and a positive tailwind for the trust. As a result of challenges facing the asset class, a number of Matt’s high-quality companies are trading at attractive valuations, leading to a wave of takeover activity. RIII has seen several bids for its holdings, which has supported returns, although with the larger-cap FTSE All-Share Index as the formal benchmark, the smaller company bias has been an overall headwind.

Another outcome of the low valuations is an elevated yield. Whilst not an explicit goal for the manager, the board has sought to maintain a progressive Dividend policy. The trust currently offers a modest yield of 2.1%, with dividends per share having grown by 36% over the past five years.