Launched in 2015, this fund can invest in all kinds of European firms but has a bias towards those of a medium size. The managers look for quality companies, with strong brands or clear competitive advantages that allow them to grow their revenues and increase both profit margins and their return on capital. Importantly, these companies are not reliant on the external economic backdrop to achieve these goals.
Previously LF Miton European Opportunities Fund
Our opinion
Premier Miton European Opportunities is genuinely differentiated to many peers, with a willingness from the managers to look at company prospects in isolation, rather than within the context of wider market narratives. This allows them to have longer time horizons, supporting an open and flexible style. That being said, the managers do consider style risks at a portfolio level. This, combined with the multi-cap approach, are good ingredients for strong long-term outperformance.
Company description
Premier Miton Investors was formed in November 2019 following the merger of Premier Asset Management Group plc and Miton Group plc. The combined company manages around £11.2 billion of assets on behalf of a wide range of individual investors and institutions. The two principal areas of focus are outcome-based, multi-asset investment, and single-strategy, active equity investment. Premier Miton was awarded the Elite Provider for Equities rating in 2021.
Fund manager
The fund has three co-managers: Carlos Moreno, Thomas Brown, and Russell Champion.
Carlos is head of European equities at Premier Miton, having joined in August 2015 from JOHCM. He has also had fund manager roles at Thames River CM and at Fidelity where he started his career. Carlos has degrees from the University of Cambridge in Engineering Design, Manufacturer and Management and from the University of Exeter in Mechanical Engineering.
Thomas Brown worked with Carlos at Thames River, before joining Mitsubishi UFJ Asset Management. Prior to this he was an assistant fund manager at the British Steel pension fund. He joined Premier Miton in November 2015 soon after Carlos.
Russell Champion is the newest member of the team, having joined in August 2021 from RWC (now Redwheel, where he was an analyst and manager. Prior to that, he was an analyst at Fidelity.
Investing is like dieting, everyone knows what you should do. The difficult part is having the discipline to stick to it.
Carlos Moreno, Thomas Brown, Russell ChampionFund manager
Investment process
Premier Miton European Opportunities puts quality first in the search for portfolio companies. The team is looking for businesses with a high return on capital, strong balance sheets (such as manageable debt levels) and with barriers to competition. These firms will also be able to compound their earnings, supported by revenue growth and an ability to invest this at the same or better rates of return.
The managers will find such companies by having a longer-term view than the market, focusing on returns of five years or longer. These characteristics mean the fund is likely to have a mid-cap bias, though it is multi-cap and has an unconstrained approach.
The investable universe starts with around 1200 companies. This is reduced as the team removes companies with characteristics it doesn’t want – such as utilities and large oil companies, which do not have superior returns on equity. Others removed are those without substantial barriers to competition, such as airlines and some retail names, and those without substantial growth opportunities, such as telecoms companies. Finally, businesses which are not undergoing positive changes, such as many pharmaceuticals, are taken out.
This leaves around 150 companies. From this point the team will look at factors under the management’s control, removing those not in control of their destiny.
To build conviction, the managers will use their in-house analysts and a range of broker networks to assess ideas. They will also do a lot of travelling to meet companies and get under the skin of what they do. Throughout the process, the team is trying to find a materially different view of the company to that of the market. This could be regarding something like the earnings power over the long term, better competitive dynamics to what is forecast, or changing industry drivers.
Once they establish an idea, the managers will vary the position size from between 1-4% depending on their conviction in the story. Stocks will be trimmed if they go above the top level as a result of good performance. If the thesis for a holding breaks, then they will exit the position.
ESG
ESG - Limited
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 have no house view on ESG limitations. They do, however, believe that ESG considerations should be fully integrated into the investment process and considered alongside financial factors, rather than undertaken by a separate team. This allows the managers to then make a call as to what level of risk they are prepared to take and whether a company is suitable for inclusion in the fund. To this end, the company has focussed on training and empowering its fund managers to undertake engagement and voting activities as part of their daily investment activities where relevant.
The managers of this fund believe that assessing each company's approach to ESG related risks gives them additional information on the investment opportunity. This is undertaken throughout the investment process, including in company research and analysis, portfolio monitoring and buying and selling decisions. They believe that combining financial analysis with ESG analysis leads to improved decision making and therefore better outcomes for investors.
Risk
The fund’s risk framework is built around market forces. The managers want to maintain a neutral balance between cyclical and defensive stocks, with the aim of minimising economic risk in the portfolio. The fund will hold between 40-55 holdings, none of which will exceed 5% of the portfolio, and minimal cash.
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