Four years since Brexit: European equities beat UK
In the four years since the UK voted to leave the European Union, European equities have outshone...
TB Amati UK Smaller Companies
An unconstrained portfolio, seeking structural UK growth businesses that can grow faster than the economy, TB Amati UK Smaller Companies fund is managed by a highly experienced trio of small cap specialists. The portfolio of 65-70 companies focuses on structural growth businesses, which the managers believe can add value in the under-researched small and mid-cap part of the market.
Our opinion
TB Amati UK Smaller Companies fund has a very solid investment framework, which has consistently worked for 20 years. The fund is managed by a trio of exceptionally experienced managers and few smaller companies funds can boast this level of resource. Even fewer can match this fund’s long-term track record, which has been outstanding.
Company description
Amati is a specialist fund management boutique based in Scotland, with a focus on UK mid and small caps. It was formed after a management buyout of Noble Fund Managers from the Noble Group in January 2010. Amati UK Smaller Companies is the firm’s flagship fund, but the team also runs an AIM IHT portfolio service and an AIM Venture Capital Trust (VCT). The company is majority owned by the staff, with the remaining 49% held by Mattioli Woods.
Fund manager
TB Amati UK Smaller Companies fund is managed by a trio of co-managers. Dr Paul Jourdan co-founded Amati Global Investors in January 2010. The fund had a different name in the past, and Paul has been managing it since 2000. Prior to 1998 Paul was a professional violinist. David Stevenson joined Amati to co-manage this fund in 2012. He previously worked as an investment director and fund manager at SVM and subsequently founded Cartesian Capital in 2005. David is a Chartered Accountant. Anna Macdonald joined Amati in 2018 from Adam & Company, where she led research. She also has expertise running a successful AIM-listed portfolio service, as well as a breadth of experience managing portfolios. Each of the managers is also an analyst and responsible for different sectors.
We believe that UK Smaller Companies can represent an outstanding asset class for long term investors. There are few better investments than businesses which can grow over the long term. Our job is to find them for you.
Dr. Paul JourdanFund manager
Investment process
This is an unconstrained, stock-picking fund. It focuses on structural growth businesses, which the managers believe can add value in the under-researched small and mid-cap part of the market. The process begins by filtering out FTSE 100 and investment companies. The managers then look for companies with following attributes: barriers to entry; a competitive advantage; revenue visibility; pricing power; sustainable growth; an adequate balance sheet and the ability to finance growth; incentivised management with a good track record; and takeover potential.
‘Red Flags’ they avoid include: aggressive accounting; growth by acquisition; consistently reporting ‘exceptional’ items; poor profit to cash conversion; competitive threats from larger companies or new technologies; significant liabilities; lumpy income; and ‘fashion’ stocks.
Valuation is important, and the managers love to buy cheap businesses when they can, but they think it is much more important to find the right companies first. At least two of the three managers must agree on any investment decision but, in practice, any disagreements are worked out and addressed before any conclusion is reached.
The portfolio is under constant re-appraisal and stocks are sold when either the original investment premise no longer applies, there are better opportunities, the sector or macro outlook is deteriorating or there are signs of poor corporate governance.
Risk
The portfolio is well diversified, with around 65 to 70 stocks. Stocks are limited to maximum of a 5% position in the portfolio, after which they will be trimmed. Initial positions are 1% to 2% and this can expand to 3% or 4% over time. Sector positioning is largely a residual of the underlying stock selection. The fund does have a growth bias and, like any smaller companies fund, it can suffer heavy drawdowns during periods of market weakness. The fund’s volatility has varied over time but generally it has been similar to its average peer. All due diligence is subject to peer review.
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