The CF Miton UK Value Opportunities fund is the second best performer in the highly competitive IA UK All Companies sector since launch three years ago, according to research by FE Trustnet, underperforming its only rival for the top spot the MFM Slater Growth fund by just 0.6 of a percentage point.
Co-managed by Georgina Hamilton and George Godber since launch, the fund has made a 57.18 per cent total return, which ranks it second in the IA UK All Companies sector compared to a peer average return of 17.55 per cent and a gain in the FTSE All Share index of 12.10 per cent.
Performance of fund vs sector and index since launch
Source: FE Analytics
This has been achieved at a time when, according to many market commentators, value has been hugely out favour in the UK equity market. This is shown in the graph below as far as the data goes back, to September 2013.
Performance of indices since Sept 2013
Source: FE Analytics
Not just an arbitrary number, three years is the minimum track history that many professional fund buyers will allow before even considering adding a portfolio to their ‘buy’ list.
This could mean inflows are likely to move more quickly. Especially considering it took in £623m of new cash in the past 12 months – the most of any active fund in the IA UK All Companies sector - and has cap on its size at £1.2bn. The fund has taken in £111m in the last month alone, although it should be noted that £75m of this came from legacy assets from the FP Miton Undervalued Assets fund which merged with Miton UK Value Opportunities.
Godber and Hamilton honed investment style on the successful FP Matterley Undervalued Assets fund before they joined Miton and so have a longer term record of applying their strategy.
The pair split their portfolio of 60 or so stocks into two distinct themes. These are “cheap value creators” and “bargain assets” but they also say they have a strict ‘safety check’ for all of their stocks to aim to avoid potential value traps.
This approach has led them to stocks such as Bellway, Barratt Developments and JD Sports.
Hamilton (pictured) recently told FE Trustnet in an exclusive interview that the fund’s outperformance last year was as much about avoiding certain “dangerous” parts of the market as well as finding “the real gems”. 
“We definitely benefited from avoiding companies that had balance sheets that weren’t strong enough and ended up cutting their dividends. Centrica, Tesco etc. Our positive return also came from a mixture of different sized companies, which is typical for our fund which doesn’t look so much at sectors,” Hamilton said.
“We are actually finding more opportunities at the moment with more stocks passing our safety criteria.”
The cheapest areas of the markets currently include housebuilders and financials, Hamilton adds.
“We continue to really like the housebuilding sector which combine very strong balance sheets with cheap returns on capital and visibility of those is very good. Although it is supported by the government and we are very aware of that.”
“In terms of new shares, and we really are seeing a lot of new opportunities, we have also gone into more financial shares having had limited exposure since launch.”
“We have found a number of clean banks. We have added Aldermore and Clydesdale banks.”
One fan of the fund is the Share Centre’s Andy Parsons, believing it will continue to fare well in volatile market conditions.
Parsons said: "When it comes to managers who excite me and give me something a bit different, I love George (pictured below) and Georgina at Miton. We've been followers of theirs for the three-and-a-bit years, investing in the fund when it was well below £100m.” 
“We just think they have a fantastic value approach. There's a lot of argument over exactly what 'deep value' is, but for me it comes down to a manager looking at a business, understanding its financials and working out a value for that business, versus what it is trading at in the market. It's not just about going against market sentiment."
"They might not be on as many people's radars as other names but to me, these are tomorrow’s stars."
Charles Stanley Direct’s Rob Morgan is also a fan of Godber and Hamilton’s style but recently warned the rapid growth in popularity of the fund could be a potential barrier to outperformance if assets continue to grow swiftly as more fund pickers take notice.
“I like it, they are good managers and have a good investment process. My only reservation is that outperformance may be constrained if the fund becomes too large – its small cap orientated, at least historically,” Morgan said at the start of 2016.
“There is probably enough capacity for now but worth keeping an eye on especially if liquidity in small cap dries up,” he added.
CF Miton UK Value Opportunities has a clean ongoing charges figure (OCF) of 0.83 per cent.
An exclusive video interview with co-manager of the fund Georgina Hamilton will be published on FE Trustnet later today. Stay tuned.
