They will be replaced by Andrew Jackson who managed the top quartile performing Ecclesiastical (now EdenTree) UK Equity Growth Fund from November 2003 until his departure last summer. In that time the fund returned 263 per cent which compares favourably with the sector average return of 153 per cent. In the decade prior to his departure, it was the 12th best performing fund out of 164, producing a total return of 190 per cent, significantly outperforming the sector average return of 102 per cent.
Mr Jackson joins Miton on Monday, 27 June and his appointment can’t come a day too soon given that in the month after news of Mr Godber and Ms Hamilton’s departures broke, assets under management in the CF UK Value Opportunities Fund declined from £869m to £589m, implying fund outflows of around £250m after accounting for market movements. The CF UK Value Opportunities Fund cash levels have risen from 4.6 per cent to 16.1 per cent, implying a current cash position of £95m. The flagship fund generated £5m of Miton’s revenues last year and accounted for 29 per cent of the group’s £3.03bn assets under management (AUM) at the end of March 2016. Having attracted the highest funds inflows in the IA UK All Companies sector over the past 12 months, the fund’s assets under management are now back to where they were at the start of 2016.
Clearly, some clients will still be holding onto their investments with the intention of taking their mandates across to Polar Capital when Mr Godber and Ms Hamilton have served out their notice periods. However, Mr Jackson’s appointment looks a sound move and should stem the outflow. For starters, he has beaten the market in 62 per cent of the months he has managed money, which is a high ratio by any standard, and this rises to 74 per cent of the time in down months, implying that he’s done a good job in difficult markets. Secondly, both Miton and EdenTree are boutique asset management houses and have similar cultures, so Mr Jackson should fit in well into his new role. Thirdly, his background as a classic, no-thrills stockpicker makes him well suited for the leadership role on the CF Miton UK Value Opportunities Fund given it already has a history of delivering attractive returns, with stock weightings that are largely independent of the mainstream indices.
Impact on profits
Of course, predicting the size of the CF Miton UK Value Opportunities Fund after Mr Godber and Ms Hamilton leave is fraught with difficulty. However, it would seem reasonable to expect Miton’s pre-tax profits this year to fall somewhere between the £3m in 2015 and the £4.4m estimate of analyst Stuart Duncan at house broker Peel Hunt, which was made prior to Mr Godber and Ms Hamilton handing in their notice and the subsequent funds outflow. Moreover, with the shares flatlining around the 26p mark, having lost a quarter of their value after Mr Godber and Ms Hamilton’s departures were announced in early April, they are trading on only 12.5 times last year’s cash-adjusted earnings after accounting for a cash pile worth 8p a share. The shares also offer a 2.6 per cent dividend yield.
So, although it’s likely to take time for investors to regain their confidence, I do feel that the bad news is priced in at this level. It’s worth pointing out that Miton is not a one trick pony and other funds have been showing strong momentum. For instance, CF Miton UK Multi Cap Income Fund had significant inflows last year (assets under management increased from £378m to £586m), and Miton UK MicroCap Trust (MINI) raised gross proceeds of £50m at launch on 30 April 2015, and a further £28m subsequently. It has proved a rewarding investment too.
The bottom line is that if you followed my advice to buy Miton’s shares when they were trading just below 23p ('Poised for a profitable recovery', 4 April 2015), I would continue to hold them for recovery at 26p. Hold.
