As a team, we specialise in UK small and mid-cap companies where we believe we can add long-term value. We are the quintessential investment ‘boutique’ as we do not invest in FTSE100 stocks, a rather overcrowded marketplace. We manage four distinctive, but complementary funds, including both income-focussed and growth-focussed Open-Ended Investment Companies (OEICs) and Investment Trusts. A more detailed description of each fund is set out below.
Our belief in small and mid-cap
Smaller companies are essentially those that comprise the lowest 10% in terms of the value of the market, and, as a consequence, they attract relatively little attention. However, since 1955, this part of the market has outperformed the FTSE All Share Index by 3.7%* per annum, on a total return basis. When these returns are compounded, the investment case becomes even more compelling.
It is entirely logical that the smallest part of any business is going to attract the least interest, and so it is with the broking community in the City. It is simply much more lucrative to chase bigger deals. This results in relatively little coverage of a lot of the 1,500 or so UK small and mid-cap companies, which leads to significant opportunities to exploit pricing inefficiencies. We are in a good position to be able to do this as 100% of our time and effort is concentrated in this area.
The increasingly short-time horizons of some participants in the market can lead to shares frequently being mispriced for those managers with a medium-term or longer-term outlook. Investing in small and mid-caps naturally puts us in this camp and our in-depth knowledge of the companies in which we invest allows us to take advantage of growing short-termism.
For the reasons outlined above, share price movements can often be quite sharp, in both directions, but our investment process seeks to look through this short-term ‘noise’, as often these price changes will have nothing to do with the company itself. Whether we have our income or growth hats on, the one age-old adage to which we adhere is ‘cash is king’. For our income funds we look to invest in ‘dull but worthy’ companies and for our growth funds we look for more dynamic businesses. In the former, it is imperative that there is enough cash to pay good levels of dividend to shareholders and, in the latter, that there is sufficient cash to fund the growth of the business.
We have a very experienced team and an investment approach, which we believe allow us to identify under-priced assets. By concentrating on our niche, we have been able to deliver strong performance to our fund holders.
*As measured by the Numis UK Small Company Index.