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Activity brings rewards for fund manager Miton as inflows surge ahead

Increasingly, funds inflow is directed towards the US, European and multi-asset strategy funds, not just the small caps stalwarts
Rising chart
Nearly £500mln flowed into Miton funds last year, with this year also starting strongly

Miton Group PLC (LON:MGR) is renowned for its small-cap funds, but the business is now maturing into a much more diverse operation.

Increasingly, funds inflow is directed towards the US, European and multi-asset strategy funds, not just the small caps stalwarts run by star managers Gervais Williams and Martin Turner, chief executive David Barron told Proactive.

WATCH: Active style is the reason for Miton Group's funds surge says CEO

Strong performances across its stable of 13 funds and three investment trusts in 2017 and into the current year are driving this interest.

Thirteen of those strategies are first or second quartile performers since launch or the managers took over the fund, said Barron.

That performance has been reflected in a net inflow of £494mln in 2017 and a further £190mln in the first two months of 2018.

Assets under management are now more than £4bn.

Active worth the cost

Barron believes the active style of the group's fund managers is behind the surge of investment money.

Technology advances mean passive or quasi-passive investing is almost free, it’s so cheap now, he says.

“If you have a good active product, you should be able to charge for it and if investors are taking a view on an active fund manager, they want proper active management.”

For some of the funds, that means a deviation from the benchmark index of more than 90% while typically, across the portfolio, the figure is over 80%.

Financial adviser and wealth managers on behalf of private investors, particularly, are an important component of flows into the group’s funds at present, he adds.

Rising tide lifting Miton’s boat

That rising tide of funds has translated into Miton PLC’s performance.

In 2017, assets under management rose by 21%, profits by 33% while there was a 40% dividend hike on top of two share buy-backs.

In total, about £7.5mln was paid back, including the dividend but cash generation is strong and there is £20mln in cash and  M&A is not ruled out if others ‘slip up’.

At 49p, the shares yield 2.9% and stand on an earnings multiple of around 14 times.

New funds

Even without any deals, Barron sees scope to grow organically through the addition of new funds and points out the £4bn it manages is still modest when ranked against the total investment market overall.

Two new funds have already launched this year: A US Small Cap fund and a new multi-asset fund aimed at advisers.  

They mark a further diversification from the multi-asset focus when the current team took over in 2011 and other types of fund are in the pipeline.

 “While we are still well-known for micro-cap, small-cap, UK income, increasingly we are well-known for our US, Europe and multi-asset funds.

A lot of spade work has been carried out in recent years and the benefit is being seen both in the growth in assets under management and the increasing number of funds.

Shares climbing

Markets have recognised this and over the past two years, Miton’s share price has climbed by 85% to 48.8p, valuing the group at £81mln.

Barron, who runs the PLC side and not any of the funds, answers diplomatically when asked if it is better to invest in Miton or one of its funds.

Not everyone wants a single stock, he says, and many want the spreading of risk that exposure to the 140 companies or so a fund gives.

Even so, it’s hard to argue against the ex-JP Morgan man’s view that Miton Group, the PLC, is very well-placed at present.

The last results highlighted the operational gearing effect of larger amounts of money being managed having a disproportionately beneficial impact on Miton’s earnings.

Straightforward

“We are a really straightforward operation - 13 trusts, 3 investment trusts and we sell to UK investors, “ he adds.

“We are broader and more diversified than when the new team took over seven years ago.”

Barron has been around long enough to know markets are cyclical and things can quickly go the other way, but “if you manage your own portfolio, Miton is an interesting opportunity.”

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Miton Group PLC Timeline

Newswire
January 14 2016

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