MITON UK MICROCAP TRUST PLC
The power of small
Over the decades of globalisation, plentiful growth with low-cost debt came to be regarded as the norm.
In a world of easy credit and gigantism, smallness didn’t get much of a look in.
However, since 2008, ultra-low interest rates have led to a stagnation of global productivity. As this has come through in supressed wage growth, electoral attitudes have hardened against the previous status quo.
Miton fund managers Gervais Williams and Martin Turner believe market trends are at a multi-decade turning point. In future, investors will become more discriminating in their choices, and prioritise capital allocation into assets generating productivity improvement.
The investment strategy of Miton UK MicroCap Trust plc has been crafted in anticipation of these changing market trends.
Two features define micro cap companies, the smallest of small listed company shares - their access to capital and management agility. When markets are unsettled, these factors tend to enhance the return of micro caps.
A differentiated Trust
The closed-ended structure of the Trust, where there is a fixed number of shares in issue, means the managers can take a long-term view. There are over 1,000 companies listed on the FTSE Small Cap, FTSE Fledgling and FTSE AIM Indices.
So, the opportunities for active managers to select under-researched companies are plentiful. This helps ensure investors capture the illiquidity premium1 that comes with micro cap companies.
As managers Gervais Williams and Martin Turner commented: “Like others, we love spotting overlooked companies with vibrancy and urgency. The advantage of micro caps is that there aren’t many others looking to pick these out.”
In contrast to many existing smaller company funds or investment trusts, this Trust is genuinely invested in micro cap holdings.
“With world growth stalling, there’s renewed interest in self-help assets that can buck the economic slowdown, and sustain ongoing growth. We are not just looking for stocks that survive the changing agenda. We’re looking to back those that can really thrive.”
“Alongside, the returns of the Miton UK Micro Cap Trust tend to be less correlated with mainstream indices, because the portfolio invests across such a wide range of industry sectors.”
The shares of smaller UK listed companies tend to be more difficult to buy or sell, and hence their share prices often move more abruptly, although this negative can offset higher long-term returns. This effect is known as the illiquidity premium.