Premier Miton US Opportunities Fund

LF Miton US Opportunities is a highly differentiated US equity fund, with a greater emphasis on medium-sized companies than most of its peers. The fund is concentrated with just 35-45 holdings and invests in capital-light businesses with strong reinvestment opportunities capable of compounding over time.

Previously LF Miton US Opportunities Fund

Our opinion

We think LF Miton US Opportunities fund has an excellent, well-defined process, whilst its managers also have the flexibility and pragmatism to adjust the portfolio to different market environments. We like its ability to invest down the market cap spectrum. We also believe that the emphasis on capital-light, high return on capital businesses is a good way to invest. Nick and Hugh are both highly experienced. Performance has been strong since launch in 2013. In our view this is one of the most compelling options available to investors in the IA North American sector.

Fund manager

Nick Ford and Hugh Grieves have run this fund together since launch in March 2013. Nick has more than 20 years experience managing equity funds and has previously worked at Scottish Widows, Gartmore, Sun Alliance, Clerical Medical and F&C (now BMO). Hugh also has over two decades' worth of investment experience. He worked on the US smaller companies fund at Gartmore between 1995 and 2000. He was a co-manager, and then sole manager, of the technology funds at Societe Generale Asset Management between 2000 and 2009, and he worked on the Herald Worldwide fund before joining Miton. Hugh is a CFA charterholder.

Investing is like dieting, everyone knows what you should do. The difficult part is having the discipline to stick to it.

Nick FordFund manager

Investment process

The managers believe that only a very small number of companies will deliver consistent performance over time. As a result, LF Miton US Opportunities fund focuses on a small number of higher quality 'sustainable franchises'. The team makes regular trips to the US to attend investment conferences, undertake on-site visits and meet management teams. The meet around 200 companies a year.

There are three key characteristics they look for in any potential investment: consistent and sustainable cash flow, capital light (generating a high proportion of cash relative to the tangible assets in the business) and the ability to reinvest cash profitability, so returns compound over time.

Every potential idea is subjected to a Porter's Five Forces analysis; threat of new entrants, power of suppliers, power of customers, risk of substitutes and intensity of competition. The final portfolio consists of 35 to 45 stocks.

ESG

ESG - Integrated
Premier Miton as a firm believes managers should have the autonomy to make their own investment decisions based on the inputs available to them, and therefore has no house view on ESG limitations. It does however believe that ESG considerations should be fully integrated into the investment process and considered alongside financial factors. This allows the managers to then make a call as to what level of risk they are prepared to take. Here, ESG analysis is performed alongside financial factors by the fund managers as part of their stock selection process for the fund. The portfolio has a quality bias and screens out capital intensive industries which creates a natural bias away from traditional ESG laggards. There is also a focus on corporate engagement and voting to try and improve portfolio companies. This results in the fund often having an above average ESG profile, though for investment-led strategy reasons, rather than on a moral basis.

Risk

No single stock can have a weight greater than 5% of the portfolio in order to reduce stock-specific risk. LF Miton US Opportunities fund typically holds a much greater proportion in medium-sized companies and smaller large companies than its peers. The fund has also historically been more domestically-orientated than its benchmark index. Despite these differences, the funds' volatility has historically been roughly the same as its benchmark.

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