Miton group profile: A rebuilding project

Before the resignations of George Godber and Georgina Hamilton last April, the Miton UK Value Opportunities fund they managed had contributed significantly to the firm’s rising assets under management. The fund alone had seen assets more than triple from £211m to £783m over the course of 2015, while the firm’s AUM rose 35.8 per cent over the same period from £2.1bn to £2.8bn.

By the first quarter of 2016 Miton’s assets had hit £3bn, but just over a week later news emerged that the star fund manager pair would be departing. With assets totalling £869m – more than a quarter of AUM – shares in Aim-listed Miton dropped 28 per cent. By Q2 the fund had seen net outflows totalling £423m.

David Barron, who joined Miton as director of investment trusts and product strategy in 2013, sums up his response to the resignations as “disappointment”. “You can’t get away from that. That’s happened now.”

Miton moved decisively on a replacement. “We wanted to ensure there was a clear long-term future for the investors in that fund and the portfolio management of it was secure going forward.”

Andrew Jackson, who previously managed the EdenTree UK Equity Growth fund, took over management of the fund the day after Godber and Hamilton left the firm. Under his management, starting just one week after the UK voted to leave the European Union, the fund has returned 16.8 per cent compared with 12 per cent in the FTSE All Share, according to FE data. The IA UK All Companies sector delivered 13.4 per cent over the period. Its total assets today, however, are £290.2m.

“We’re now in the phase of letting Andrew Jackson take the reins and mould the fund in his image to be able to build up his track record,” Barron says, adding communication with remaining investors has been important.

“We’re also able to talk to new investors who supported Andrew when he was at EdenTree. It’s a rebuilding phase for that particular fund.” Jackson returned 263.7 per cent while managing the EdenTree UK Equity Growth fund between 2003 and 2015, compared to 151.5 per cent for the FTSE All Share. The IA UK All Companies returned 153.7 per cent over the same period.

Barron, who was previously head of investment trusts at JP Morgan Asset Management, is responsible for distribution in an interim capacity following the announcement in November that Ian Chimes, Miton’s former head of sales and marketing, would be joining Liontrust.

“Marketing, distribution, talking to clients is all happening still and we have got a search out there looking for someone to come in and provide leadership in that area,” Barron says. “We’ve had an encouraging response, but I’m not in a position to make any announcements yet.” Neil Bridge remains head of UK sales.

Traditionally, Miton has been known as a multi asset specialist. It currently has the £372.6m Cautious Multi Asset (previously Special Situations), £78.4m Defensive Multi Asset (previously Strategic) and £15.5m Worldwide Opportunities funds. “That whole range has been reconfigured, remodelled and is very much in the mould of David Jane now,” Barron says. Miton acquired Darwin Investment Managers in 2014, bringing Jane along with Anthony Rayner and Henna Hemnani to take over the range. Over 2016 its assets grew from £477m to £672m.

Instead of taking a multi manager approach, the range now invests directly. “It gives us greater liquidity, greater flexibility and the ability to execute our investment ideas quickly and accurately,” Barron says, pointing out that Jane used to be head of equities at M&G, which informs this approach. “He’s very much of that discipline of wanting to invest precisely rather than going through other funds and looking under the bonnet of what’s in those funds.”

The £754.8m UK Multi Cap Income fund, co-managed by Gervais Williams and Martin Turner, is now the firm’s largest. “It’s a very different type of equity income fund, which typifies what Miton is about – differentiated funds that quite often investors could hold alongside a more mainstream fund.” The fund recently reached its five-year milestone having returned 121.1 per cent over the period compared to 57.4 per cent in the FTSE All Share, according to FE data. The IA UK Equity Income sector delivered 63.6 per cent over the period.

Equity funds now outnumber multi-asset in the open-ended range with six and four respectively. Williams also runs the UK Smaller Companies and Income funds, while the £82m European Opportunities fund is the newest product, launched under Carlos Moreno and Thomas Brown in December 2015.

The US Opportunities fund, managed by Hugh Grieves and Nick Ford, demonstrates Miton’s ability to add value, beating the “extremely efficient” index, Barron argues. Positioned for a rally regardless of the US election outcome the fund has returned 10 per cent since Donald Trump’s win compared with 6.5 per cent for the S&P 500. The IA North America sector has delivered 9 per cent over the period.

Miton has one fund launch in the pipeline for the first half of this year – the Infrastructure Equity fund to be managed by Jim Wright, who joined in January from the British Steel Pension Scheme. “It would have an income bias and invest globally. One of the attractions is you’re investing in companies with high barriers to entry, a degree of inflation linkage with their income and potential for capital growth as well,” Barron says.

Regarding further fund launches, Barron says there is nothing he can talk about at this stage, but the firm does assess where there are gaps. He is reluctant to name strategies the asset manager would avoid, but suggests highly efficient liquid sovereign bonds would be “quite hard work” for active managers to add value. Highly quantitative strategies are also unlikely to feature given the firm’s focus on fundamental stock picking and outcome focused asset allocation, he says.

“We’re not going to be a waterfront firm, where you can find every type of UK fund, Europe fund. We will look for where we can add value, that’s slightly different, but that’s still within a major asset class.”

The boutique atmosphere is a selling point for new hires, Barron reckons. “They like the entrepreneurial environment here, they like the lack of clutter and bureaucracy and they like the fact that we are genuinely active. The funds here are not run to a house style or with a particularly strong eye on the benchmark.”

Political shocks such as Brexit and the election of Donald Trump as US president were business as usual for the firm, Baron says. “It wasn’t frenetic.” What the firm was focused on was communication with clients. “Everyone can chat about these things quickly and get a view. Our scale and nimbleness helps us in those situations.”

From a firm perspective, Brexit is unlikely to significantly impact Miton. “Most of our employees are UK based so we don’t have uncertainty about their ability to work in the UK. That’s a plus,” Barron says. “The majority of our sales are of UK-domiciled funds to UK-domiciled investors so we don’t have passporting or Ucits-type issues.”

Last year the asset manager’s fee margin was 68.8 basis points. “We have quite a number of capacity constrained strategies, so where we have those we are able to retain
full margins and fees on those and get rewarded for that capacity and that active
management.”

In November, it dropped the 1 per cent initial charges on the Cautious Multi Asset and Defensive Multi Asset funds because they are not capacity constrained. Ongoing charge figures are 0.82 per cent and 0.92 per cent respectively. “We’re positioning ourselves to be properly active. If you do that people will pay an active fee.”

When it comes to retaining staff, Miton has already publicly announced it has altered its remuneration structure following the departures of Godber and Hamilton. The asset manager benchmarked itself against others to offer a package based on a percentage revenue share arrangement linked to the cumulative performance of each strategy.

Any firm where managers are allowed to pursue their own ideas and therefore become very identified with their funds are vulnerable when talent exits, Barron says. “Clearly we don’t want anyone to leave, but occasionally managers might decide to leave.”

He points out the firm is less vulnerable than it was five years ago when it was 100 per cent focused on multi asset.

The numbers

£2.9bn Assets under management as of 31 December 2016

£290.2m assets in the UK Value Opportunities fund following the departures of George Godber and Georgina Hamilton

10 Funds in the open-ended range

16.8% Returns in the UK Value Opportunities fund since Andrew Jackson took over in July 2016

Justine Fearns, Research manager, Chase de Vere

Well known for multi-asset investing, Miton Group listed on AIM in March 2008 following substantial changes in the business. It emerged in better shape and embarked on re-establishing itself within the market. Gervais Williams joined the team in 2011 so it was no surprise when a raft of UK equity funds followed. David Jane and Anthony Rayner assumed responsibility for the multi-asset proposition in 2014, which they continue to manage along with Henna Hemnani. Retaining its boutique approach, Miton now provides a suite of multi-asset funds plus a range single strategy equity funds and investment trusts, gaining strength through strong performance and its focus on service standards.

Mark-Dampier-700x450.jpg

Mark Dampier, Head of research, Hargreaves Lansdown

We don’t currently have any of their funds on our list. I was surprised that they managed to lose George Godber. I would not expect a small boutique, which should come with a flexible workplace alongside equity, to see good managers leave. The shame was greater as George and co-manager Georgina Hamilton had started to attract good flows on the back of excellent performance. Still getting David Jane on the multi asset team was a good gain. With Gervais Williams comes good strength in the smaller company area. However I was disappointed another long server Ian Chimes recently left too. Is there a management problem at Miton? I like smaller groups but I expect them to be far more stable, we shall wait and see.

Darius McDermott, Managing director, Chelsea Financial Services

Miton has had a tough year. In April, it lost two of its star managers, George Godber and Georgina Hamilton, who had built up the Miton UK Value Opportunities fund to just under £1bn. For a boutique group with only £2.5bn in AUM (as at June 2016), this is obviously a blow. Sales head Ian Chimes has also just resigned.

That said, it has a real bright spot in Miton US Opportunities, run by two very experienced US smaller company managers. The fund has just over £200m and is a definite opportunity for the group to expand. Miton also has a highly regarded UK small-cap team.