The manager has retained his status as one of the top fund managers in the UK in 2013, owing to his track record of outperformance in rising and falling markets.
Marriage, who heads up the five crown-rated Cazenove UK Smaller Companies fund, says the stability of the returns in his portfolio is the result of four things he doesn’t do:
- No macro overlay – the manager is fully focused on company fundamentals
- No exposure to oil, gas and mining
- Not taking sector and thematic bets
- Avoiding loss-making companies/companies with debt on the books
"We spend all our time picking stocks," he said. "And we do meet a lot of management teams."
Marriage runs long/short money alongside his pure stock picks, which helps him to decide when to sell.
The £321.9m Cazenove UK Smaller Companies fund is a top-quartile performer over one, three, five and 10 years, smashing both the IMA UK Smaller Companies sector and the FTSE Small Cap (ex IT) index over each period.
Since Marriage took over the portfolio in January 2006, it has made 147.17 per cent, well above the returns of the sector and index, which made 62.99 and 19.93 per cent respectively over the period.
Performance of fund vs sector and index since 2006
Source: FE Analytics
The fund requires a minimum investment of £1,000 and carries a total expense ratio (TER) of 1.59 per cent.
Clearly Marriage’s investment process has paid off, but he says he has benefitted from being in one of the best-performing asset classes since the financial crisis.
"UK Smaller Companies is the best-performing asset class over the last four years bar none," he said.
"It’s all about buying things when they’re small and holding them for a long time."
Marriage says he has an average holding period of two and a half years for equities in his 60-stock portfolio.
He adds that he typically buys companies at a market cap of around £50m and sells them when they reach £1bn.
"The average market cap in our fund is about £250m," he added.
Marriage says some of the best stocks he has bought over the last five years include Scottish aviation company John Menzies, chemicals manufacturer Elementis and international corporate travel provider Hogg Robinson.
The manager also tipped scientific instrument manufacturer Judges Scientific and adhesives manufacturer Scapa.
Marriage, who also heads up the firm’s four crown-rated Cazenove Absolute UK Dynamic fund, has consistently outshone his peers over a lengthy track record, doubling the returns of his peer group composite over one, three and five years.
Over five years, the manager has made 58.89 per cent, while the peer group is up 23.46 per cent, according to FE Analytics.
Marriage says one of the best aspects of being a small cap investor in the UK is the wide variety of companies he gets to interact with each year.
"I’d find it incredibly dull to just look at one sector," he said.
The manager says he meets with 200 to 300 company management teams each year, giving him a wide range of sectors to choose from.
"We couldn’t do it if [the companies] didn’t come to us," he said.
He adds that there is so much diversity within UK smaller companies that investors really do not need to look outside these shores to diversify their risk.
"The performance [of the sector] over the last four years must illustrate that," he said. "There’s definitely a wide variety of companies out there."
Marriage’s own top-10 holdings illustrate the vast range of companies available in the UK market.
They include sport broadcasting company Perform Group, housing developer Telford Homes, industrial inkjet printhead supplier Xaar and photographic services provider Vitec Group, to name a few.
Marriage does not believe a big team is needed to do the legwork required to pick good companies.
"I’m a great believer that you don’t need a big team. It just dilutes decisiveness and returns," he finished.