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Godber and Hamilton to leave Miton: What should investors do with their UK Value Opps fund?

07 April 2016

CF Miton UK Value Opportunities has been the darling of the IA UK All Companies sector, but now managers George Godber and Georgina Hamilton are leaving the group, what should investors do with the fund?

By Alex Paget,

News Editor, FE Trustnet

Georgina Hamilton and FE Alpha Manager George Godber (pictured) are to leave Miton over the coming months and step down from their £868m CF Miton UK Value Opportunities fund, an offering that has become one of the most popular in the IA UK All Companies sector due to its stellar total and risk-adjusted returns.

The news broke last night that the duo – who had previously worked together at Mattereley and Charles Stanley – will be leaving Miton, though Godber has a one-year contractual notice period and Hamilton has six months so will continue to run the fund until a replacement is found.

Their departure has certainly come as a shock, with many discretionary fund managers and wealth managers now left with the difficult decision as to what to do with the top-performing fund that was launched by the duo in March 2013.

According to FE Analytics, CF Miton UK Value Opportunities has been the second best performing portfolio in the highly competitive IA UK All Companies sector since inception with gains of 57.7 per cent, meaning it has beaten the FTSE All Share by some 46 percentage points in the process.

It has also outperformed both the sector and index in each calendar year over that period.

Performance of fund versus sector and index since launch

 

Source: FE Analytics

Though those returns have certainly been impressive, it is the way in which they have been generated that has been most pleasing to investors.

The managers, as the name of their fund suggests, are value-orientated investors and split the portfolio into two tranches: cheap value creators and bargain assets. Though it is a multi-cap fund, Godber and Hamilton have tended to hold very little in FTSE 100 stocks, instead preferring mid-caps, small-caps and AIM-listed stocks.

Though value as an investment style has been out of favour and smaller companies tend to carry higher risk than blue-chips, the managers’ ‘safety check’ on all potential holdings means CF Miton UK Value Opportunities has also been one of the best performers in 270-strong sector for capital preservation as well.

FE data shows, for example, that the fund has had the fourth lowest maximum drawdown – which measures the most an investor would have lost if they had bought and sold at the worst possible times – the third lowest annualised volatility and the best risk-adjusted returns (as measured by the Sharpe ratio) in the peer group since launch.

CF Miton UK Value Opportunities’ capital preservation characteristics

 

Source: FE Analytics

Although the managers will continue to run the fund until a replacement is found, the news is a hammer blow to Miton – especially given CF Miton UK Value Opportunities is its largest open-ended fund and accounts for close to a third of its total AUM.


 

The market has already taken the announcement badly, which shares in Miton Group PLC down 25 per cent this morning at the time of writing.

But how should unit holders in the fund react?

The fund has certainly earned darling status within the UK equity space thanks to its performance so far, with many investors piling into the fund to gain exposure to Godber and Hamilton’s stock picking abilities.

Indeed, FE data shows CF Miton UK Value Opportunities has been the most bought active fund in the IA UK All Companies sector over the past year with its inflows of £629.3m.

The 10 most bought IA UK All Companies funds over 1yr

  

Source: FE Analytics

Gavin Haynes, managing director at Whitechurch Securities, has held the fund for a number of years and says he will need to talk to the group about its plans for the portfolio before he makes a decision on what to do with his holdings.

That being said, he points out that the success of the fund has almost entirely been down to Godber and Hamilton.

“It places the fund immediately under review, given the change in circumstances,” Haynes said.

“There is still the notice period and the managers will be in place for a number of months; they will continue to the run the fund with same process so I don’t have any immediate concerns about it.”

“However, it is a fund that has been built around their process and it has been their stock-picking abilities which have been responsible for the exceptional performance it has generated. We will want to now speak to Miton to see what else we can find out about the fund’s future.”

Chris Metcalfe, investment director at IBOSS Limited, has been a long-term backer of the fund. He is certainly disappointed by the news.

“It is a shock. Every time we have met with George and Georgina (pictured) they have both made it pretty clear that they are going to run the fund in their own way, which is exactly what we want to here as investors,” Metcalfe said.

“Obviously, we don’t know why they are leaving yet but sometimes managers and fund groups are not on the same page. Though they have their notice period, you do tend to invest in the managers rather than the fund.”


 

He says he and his team will now have to reassess their holding in the fund. While he won’t make any decision yet, Metcalfe says he will be looking for potential alternatives as well as speaking to Miton about the future of the fund.

“We’ve got around £24m in the fund at the moment and we have been really happy with it.”

“I’m always nervous about change and though it isn’t always the case, most of the time we tend to relegate a fund when things like this happen. In the UK space, there are a lot of very good funds and though we have made no decisions yet, we may have to review the sector again.”

Rob Morgan, pensions and investment analyst at Charles Stanley Direct, agrees that investors in the fund should review their holdings. However, he urges them not to make any decisions yet until the group gives more news on the subject.

“I think in small-caps the stock picking ability of the manager is very important and investors should review. However, they both have notice periods to serve so it looks like they will still be there as a team for six months – meaning investors need not rush to make a decision,” Morgan said.

He added: “It is then a question of who takes over the fund.”

 

For those investors who either hold the fund and are now unsure as what to do with it or those who had CF Miton UK Value Opportunities on their wish-list, FE Trustnet will take a look a potential alternatives to it in an article later this morning. 

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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.