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MI Chelverton UK Equity Growth
MI Chelverton UK Equity Growth invests in businesses outside the FTSE 100. The fund is governed by a comprehensive and disciplined screening process which allows the team to target cash-generative companies capable of funding their own growth. Most of the portfolio is invested in small and medium-sized companies.
Our opinion
This is a truly active fund which completely ignores any benchmark index. We particularly like the clear investment process. Quantitative screens are well-thought out and are combined with a disciplined qualitative assessment. The funds’ performance has been exceptional since it launched in 2014.Company description
Founded in 1998, Chelverton is a small boutique asset manager which specialises in small and medium-sized UK companies. The company's philosophy is to focus on doing a few things extremely well. The firm was initially best known for its Chelverton UK Equity Income fund. But the UK Equity Growth fund is also becoming increasingly well known.
Fund manager
James Baker has over 30 years of equity market experience, specialising for all of his career in UK small and medium-sized company stocks. He has worked for several organisations over the years, but most notably spent 12 years from 1999 to 2011 as part of the ABN Ambro small & mid-cap sales team. Prior to joining Chelverton, he worked as an assistant fund manager at Rathbones. He graduated from Cambridge with a degree in history.
James is supported by Edward Booth and Henry Botting.
Ed joined the team in 2016 and became a co-manager in 2017. He graduated from the London School of Economics with a degree in Economics with Economic History. He is a qualified chartered accountant. Prior to joining Chelverton, Ed worked as a business analyst for Barclays.
Henry joined Chelverton Asset Management in August 2021 as an assistant fund manager, becoming a fund manager in August 2022. Prior to joining, Henry worked on the Equity Sales team at FinnCap, where he specialised in UK small and micro-cap companies. He has a degree in Economic and Social History from the University of Edinburgh and prior investment management experience at Rathbones and OLIM. Henry is a CFA Charterholder.
By focusing the portfolio on highly cash generative mid & small-cap companies that can fund their own growth- I believe we can generate strong long-term performance without taking on excessive risks.
James BakerFund manager
Investment process
The fund invests in growing businesses which have plenty of cash on their balance sheets and can finance their own growth. High margins and shareholder-friendly management are also important factors. These ideas are built into MI Chelverton UK Equity Growth’s initial screening process, which looks at all UK stocks below the FTSE 100 (the UK’s largest 100 companies). The results of the screen leave them with about 250 stocks for further qualitative analysis. James and the team will then assess the companies’ management teams and determine the predictability of their revenues, as well as the sustainability of profits. The final part of the process looks at the companies’ valuations.
ESG
ESG - Integrated
Chelverton does not class its funds as sustainability focussed or impact funds, however, ESG issues are integrated within its risk assessments and investment process. As well as being supported by a dedicated ESG team, the fund managers also have access to various ESG data sources, though they prefer to use internal risk control techniques such as active engagement. They explore management issues such as the integration of sustainability strategy within business plans and the company's focus on ESG risk and opportunity. Their process relies heavily upon qualitative data to enable a dynamic understanding of company resilience and agility, focussing on material ESG issues as a part of this process. Committed holdings are established steadily over time, and managers engage regularly with management to build required conviction.
Risk
MI Chelverton UK Equity Growth has a bias to smaller companies, which can be a higher-risk area of the market, but it is well diversified with a portfolio of around 100 stocks. Risk is also managed in the initial screening process, which strips out heavily indebted companies, and in the qualitative assessment which favours businesses with strong recurring revenues which are less susceptible to the economic cycle.
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