Premier Miton senses opportunity

“The days of asset managers looking to match the index ‘plus one [percentage point]’ and all the tight controls that come with that activity, are over in my opinion,” says Premier Miton (PMI) chief executive Mike O’Shea, speaking at the fund manager’s full-year numbers.

The death of active management has been heralded many times before, even if the brickbats are usually thrown from the other side of the fence. Still, there’s a logic to O’Shea’s view. At a certain size, larger peers can end up stumped by mean reversion, organisational bureaucracy, and stale branding. By contrast, smaller brands can quickly establish momentum with niche fund lines.

That’s made all the easier when those funds perform. By the end of its latest reporting period, smart strategies and a bias towards opportunities and value-investing meant 83 per cent of Premier Miton’s funds were in the first or second quartile of their respective sectors since launch. On a five-year view, that ratio stretches to an impressive 95 per cent.

This helps explain the swing to positive inflows and leap in assets under management (AUM) to £13.9bn. Broker Investec now reckons the group has the “capacity to deliver a near doubling” in client funds over the next five years. For its part, Premier Miton thinks £20bn is achievable by 2025.

Acquiring River & Mercantile’s (RIV) funds business would presumably help in that endeavour, although a rival bid from industry veteran Martin Gilbert’s AssetCo and the small matter of financing means a deal is not guaranteed. O’Shea sees synergies with R&M’s value-focused funds and traction with institutional investors.

Investec expects earnings of 12.2p per share this year, which looks achievable. Buy.

Last IC View: Hold, 165p, 28 Nov 2019