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The two managers taking the UK All Companies sector by storm

04 February 2015

Miton’s George Godber and GVO’s Jamie Seaton have recently been made FE Alpha Managers. In response to some of our readers’ comments, we compare and contrast the two managers and see how they stack up against the more established names in the sector.

By Alex Paget,

Senior Reporter, FE Trustnet

The IA UK All Companies sector is home to some of the best known managers available to investors, with funds run by the likes of Nigel Thomas, Richard Buxton, Nick Train and the Liontrust duo of Anthony Cross and Julian Fosh all very widely held. 

However, there are a number of managers who are challenging the old guard and two who have become increasingly popular are GVO’s Jamie Seaton (pictured) and Miton’s George Godber.

The two were recently named FE Alpha Managers thanks to their performance on their respective GVO UK Focus and CF Miton UK Value Opportunities funds, which have both significantly outperformed over recent years.

At the bottom of that article, a number of you wondered how the two managers compared against each other and, more importantly, how they stacked up against “some of the more established names you regularly see in the press in the All Companies space”.

We thought it was a good idea and in this article, with the help of the experts and data from FE Analytics, we will try to answer those questions.

Firstly, it must be pointed out that a direct comparison between the two managers is difficult, given that Seaton started running his five crown-rated fund in April 2009 while Godber’s track record started in August 2008 on the FP Matterley (now Miton) Undervalued Assets fund. On top of that, the former took a small break from fund management between leaving Matterley in September 2012 and launching his popular CF Miton UK Value Opps fund in March 2013.

Nevertheless, as the graph below shows, if you take out Godber’s break, the two managers have delivered very similar return profiles over recent years.

Performance of managers over 5yrs
      

Source: FE Analytics

We will start with Seaton who has built up an impressive track record on his highly-concentrated £252m GVO UK Focus fund.

According to FE Analytics, the fund has been the ninth best performing portfolio in the 241-strong sector with returns of 235.02 per cent since he took charge, beating the FTSE All Share by 113.31 percentage points.

Performance of fund versus sector and index since Apr 2009



Source: FE Analytics


Some of the better known funds to have beaten it over that time include Ed Legget’s Standard Life UK Equity Unconstrained, Mark Slater’s MFM Slater Growth and Nick Train’s CF Lindsell Train UK Equity.

Seaton was somewhat fortuitous in the fact that he started running the fund one month after the market bottomed after financial crisis of 2008, but he has shown an ability to outperform in varying market conditions.

GVO UK Focus has outperformed the sector in every calendar year since Seaton has been in charge, though it did lose more than the FTSE All Share in 2011. Nevertheless, Nick Train is the only real big name manager to have achieved that level of consistent outperformance.

It means that Seaton has been top decile and beaten the likes of the growth-orientated Nigel Thomas and Richard Buxton, who is more value driven, for both his alpha generation, relative to the FTSE All Share, and its risk-adjusted returns as measured by its Sharpe ratio.

Our data shows, however, GVO UK Focus has generated slightly less alpha and has a lower Sharpe ratio than established managers such as Train and the Liontrust duo.

The performance of his fund has meant GVO UK Focus has become popular with fund buyers, such as Apollo’s Ryan Hughes, who explains how the manager goes about building his portfolio and why he wanted the fund within his portfolio.

“The key attraction for us was Seaton’s unconstrained and high alpha approach,” Hughes said.

“We like that sort of benchmark agnostic approach as we always feel benchmarks are backward looking. The fund tends to be very concentrated as well, given that the maximum number of holdings is 35.”

Hughes says Seaton values companies with a “private equity hat on” as he thinks about the intrinsic value of a business and how much a potential buyer would pay for it.

Hughes says that, by evaluating factors such as cash flow, balance sheets and possible catalysts for change, Seaton is left with a small list of companies with a high return on equity, high cash generation and low levels of debt.

Where the fund does differ to some of the more established names, however, is Seaton tends to avoid the mega-cap stocks within the FTSE All Share and will instead invest down the lower end of the FTSE 100, in the FTSE 250 and in selective small cap stocks.

Godber (pictured) has a slightly different approach to Seaton, but also has a decent long-term track record.

As manager of the FP Matterley Undervalued Assets fund between August 2008 and September 2012, Godber was top quartile with returns of 45.42 per cent while the FTSE All Share returned 28.16 per cent.

Performance of fund versus sector and index between Aug ‘08 and Sep ‘12



Source: FE Analytics


Over that period, which was a very turbulent time for the UK equity market, the fund did underperform the likes of CF Lindsell Train UK Equity and Liontrust Special Situations, but was in line with Thomas’ AXA Framlington UK Opportunities fund and beat Buxton’s Schroder UK Alpha Plus fund.

Also, while Godber’s fund was top quartile for its alpha generation relative to the FTSE All Share and risk-adjusted returns, it wasn’t a standout performer compared to the sector’s more established names.

It was also bottom quartile for its maximum drawdown over that time as a result of its underperformance during the market falls of 2008 and 2011.

However, Godber has come onto a lot more investors’ radars now he has launched his £150m CF Miton UK Value Opportunities fund with Georgina Hamilton as many, such as Whitechurch’s Ben Willis, have started allocating to it as an alternative to the likes of Schroder UK Opportunities.

“The Miton fund is a high conviction portfolio,” Willis said. “Godber does have a bit of a macro overlay, but really he is an unconstrained bottom-up stockpicker who doesn’t look at the benchmark.”

“Ultimately, the fund is deep value as the managers are looking for overlooked and out-of-favour companies, normally ones which have been badly run but there is a catalyst for change. However, that can lead to value traps so they do analysis on each stock to check the financial strength of a company.”

Willis points out that though the fund is “multi-cap”, Godber and Hamilton are unlikely to have too much in the FTSE 100 as those companies tend to be overly researched and therefore the managers are unable to find overlooked value stocks.

CF Miton UK Value Opps currently has just 7 per cent in the FTSE 100, while the 64-strong company portfolio is split between the FTSE 250, Small Cap and AIM indices.

Since the launch of Godber’s new fund, it has been the sector’s seventh best performing portfolio and has more than doubled the index’s gain with returns of 31.66 per cent. As a point of comparison, those returns are within 1.92 percentage points of Seaton’s funds gains.

Performance of funds versus sector and index since March 2013



Source: FE Analytics

Both funds have outperformed nearly all the recognisable established managers in the sector – Nick Train, Richard Buxton, Alastair Mundy, Nigel Thomas and Liontrust’s Cross and Fosh – over that time, except Mark Slater’s MFM Slater Growth fund.

Both GVO UK Focus and CF Miton UK Value Opps were top quartile in the strongly rising market of 2013 and in 2014’s flatter market conditions. Nick Train is the only name from the list above to have achieved that feat.

When comparing the two funds, FE data shows Seaton’s fund beat Godber’s portfolio in 2013, though it was the other way round in 2014 as CF Miton UK Value Opps flourished in that volatile market.

While both funds have been top decile for alpha generation and risk-adjusted returns since Godber launched his fund, CF Miton UK Value Opps has outperformed GVO UK Focus for both metrics over that time.


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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.