Investors who sold out of CF Miton UK Value Opportunities last year after Georgina Hamilton and George Godber’s departure may well be “kicking themselves”, according to some industry commentators, following stellar gains from new manager Andrew Jackson over the past 12 months. 
However, others warn the change in investor style could mean long-time investors will have to alter their expectations for the fund’s behaviour over the long term, with its portfolio more growth-orientated than Hamilton and Godber’s deep value approach.
This comes exactly one year after FE Alpha Manager Jackson (pictured) took to the helm of the popular fund, which experienced mass outflows when the former managers announced their departure for pastures new at Polar Capital.
As highlighted in an FE Trustnet article at the time, some investors voiced concerns that Jackson (pictured) – who managed the Ecclesiastical UK Equity Growth fund for several years – would be stepping out of his comfort zone by switching his style of investing.
However, the fund has performed remarkably well over the last 12 months, having beaten its average peer in the IA UK All Companies sector by 15.85 percentage points with a total return of 36.5 per cent.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
Jackson attributes this to stock selection in an otherwise challenging investment environment, which has been partially caused by Brexit uncertainty and prime minister Theresa May’s “botched” general election.
“The upheaval in markets provided a perfect platform to unearth some new opportunities,” the manager explained.
“Previously firmly biased towards cheap earnings compounders focused on the domestic economy, the fund still embraces attractively valued growth, but also includes a much higher proportion of recovery potential in both domestic and international markets. Almost half of the portfolio is made of companies introduced over the last twelve months.
“Small and mid-cap companies will continue to dominate our portfolio. With about a third of the FTSE All Share index accounted for by the top 10 stocks, it’s essential to look beyond the big players for differentiation.
“Moving down the market cap scale also gives us the opportunity to develop an edge in understanding individual companies, and spot what other investors have missed.”
While the portfolio still includes domestic names such as housebuilder Bellway, Jackson remains cautious on these types of businesses and favours the outlook for global-facing enterprises.
Those familiar with Godber and Hamilton’s investment process will be aware that this approach is indeed different, but the fund’s returns are arguably not to be sniffed at.
One year on from Jackson’s tenure, what do the industry commentators think of the fund and how it has changed?
Patrick Connolly, head of communications at Chase de Vere, said his firm moved the fund from a ‘buy’ to a ‘hold’ after the departure of its former managers because of the uncertainty caused by a new manager and a change of process on the fund.
“We wanted to see the new manager would bed in and then how he performs in different environments before we would consider moving the fund back to being a ‘buy’ again,” he explained.
“It hasn’t surprised us that Jackson has done well. If we did not think that he was a good manager we would have moved the fund to a ‘sell’ when Godber and Hamilton left.
“Our clients who held the fund under Godber and Hamilton have benefited from the growth achieved since Jackson took over.”
Martin Bamford, managing director of Informed Choice, said it always used to be the case that a change in fund management would lead to a temporary decline in a fund’s performance.
Given an increasing emphasis on preserving a team approach – albeit with a new lead manager at the helm – he explained that changes in personnel are now less damaging to short-term performance.
“While praise is due for what Jackson has achieved in his first year, 12 months is a very short period of time in fund management,” Bamford pointed out. “His success or otherwise should be judged over the course of the market cycle.
“Despite switching from a growth to value mandate, he has previous experience across a range of styles, including a time managing smaller companies. His own style is described as growth at a reasonable price, so a value approach would not have been a major transition.
“Only time will tell whether his initial success can be repeated. Investors who walked away from the fund when Godber and Hamilton left last summer might well be kicking themselves today.”
That said, Tilney Group’s Jason Hollands said many investors who previously backed the fund will have done so for Godber and Hamilton’s distinct deep value-driven approach.
“The fund has performed very strongly over the last year despite the distraction of outflows, so those who stayed in - either because they looked at the credibility of Andrew Jackson or through sheer inertia - can feel vindicated by their decision,” he said.
“The fund clearly still follows an unconstrained and multi-cap approach, with very high weightings to small and mid-sized companies but at the sector level this looks quite growth rather than value-orientated with high weights to areas like software and hardware, with technology making up around 16 per cent of the portfolio.
“In my view this is a more blended and pragmatic approach to identifying value than the previous team, if Jackson can prove adaptable across the cycle this could lead to more consistent returns than a deep value approach.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, agreed that those who sold out of Miton UK Value Opps naturally moved on alongside Godber and Hamilton, whose individual skills were likely to be the biggest factor upon choosing the fund in the first place.
“The fund has performed exceptionally well in the year since Andrew Jackson took over, driven by a combination of stock selection and sector and cap positioning,” he said.
“However a year is a short time in fund management and we can’t hold too much store by any 12-month performance period. Nonetheless it is a very encouraging start.”
“Andrew Jackson does have a decent longer term track record from his time at EdenTree, though with a slightly different mandate and a greater exposure to large caps.
Performance of manager vs peer group composite since start of data
Source: FE Analytics
“While performance in his latter years at EdenTree stands in him in good stead, he was riding a bit of a different beast at the time, so the focus should be on the new fund’s performance. To that extent it’s still early days, but certainly a promising start.”
Ben Yearsley, director of Shore Financial Planning, would have said at the time to switch to an alternative fund upon Godber and Hamilton’s departure, simply due to the fact they had been managing that style for much longer while Jackson was a relative newcomer to undervalued assets.
“The question of to go or not can never really be answered, except in hindsight,” he said. “At the time, you couldn't switch to a fund managed by Godber and Hamilton and therefore your choice was to stick with the fund or move to an entirely new one.
“Growth [investing] doesn't necessarily mean ‘go go growth’ i.e. stupidly high risk early stage. Growth can mean all manner of things. Andrew is more of a GARP [growth at a reasonable price] and recovery manager. In other words, a value approach to growth.
“So although the process may be different with emphasis on different areas, the results lead the manager to what he considers are cheap, or undervalued stocks.”
One point to consider though, according to the company director, is the timing at which Jackson took over the fund. Over the last 12 months, value has comfortably outperformed quality growth due to expectations of fiscal loosening and rising inflation at the end of last year.
Performance of indices over 1yr
Source: FE Analytics
“You could say he has had lucky timing, but then again he has beaten other similar style value funds over his stewardship,” Yearsley pointed out. “He hasn't done it by standing still either, moving the portfolio a fair bit since taking the reins.
“To be fair he probably has exceeded expectations as there are a number of good funds in the value space and he has beaten the lot.”
Connolly added: “It is very possible that Jackson will perform well in the longer-term. He is proving himself to be a very capable manager. We are interested to see how he performs in different environments.”
CF Miton UK Value Opportunities has a clean ongoing charges figure (OCF) of 0.83 per cent.