River UK Micro Cap (RMMC) has reappointed Liontrust as investment manager after securing the services of two of its best-known fund managers, Anthony Cross and Hugh Sergeant.
RMMC had been expected to follow George Ensor and Mayan Uthayakumar who announced in July they were leaving Liontrust to join Jupiter Asset Management at the end of the year.
However, after reviewing approaches from a “significant number” of investment groups, chair John Blowers said the board of the £82m investment company had decided to stick with Liontrust, which became its fund manager after buying River Global in March.
There will be no change to the investment approach with the fund continuing to find the best of the smallest London-listed stocks.
RMMC said: “Anthony and Hugh have proven, long-term track records with their respective specialist investment processes, and analysis of historical portfolio outcomes suggests that blending them has the potential to enhance performance on a risk-adjusted basis.”
Cross joined Liontrust in 1997 and runs its UK Smaller Companies, Special Situations and UK Micro Cap funds.
Sergeant, who joined Liontrust this year, managed River Global’s UK Recovery, UK Alpha, Global Recovery and Global Alpha funds since their inception in 2009, 2006, 2013 and 2021 respectively.
The board looks to have got a good deal from Liontrust. In addition to the two eminent fund managers, Liontrust has agreed to cut the annual management fee from 0.75% to 0.35%, while retaining the 15% performance fee for outperformance of the Numis Smaller Companies plus AIM index.
Blowers said Liontrust had committed to a “substantial marketing campaign” to grow the shareholder base reduce the 13% share price discount.
The periodic redemption mechanism designed to keep the company below £100m will be retained with the company looking to expand once the next return of capital was complete.
Blowers said: “The competitive process reflects the attractive opportunities offered by microchip stocks in terms of growth potential and current valuations and validates the strategy.”
Liontrust chief executive John Ions said: “We appreciate the confidence of the board of RMMC in being reappointed and the responsibility of delivering for shareholders. We are committed to proving the investment management, marketing, sales and resources to ensure the success of the company.”
Our view
Richard Williams, senior analyst at QuotedData, said: “A somewhat surprising outcome, given expectations that RMMC might follow the departing managers to Jupiter. The board appears to have secured attractive terms from Liontrust, most notably more than halving the annual management fee from 0.75% to 0.35%. While a change in personnel inevitably introduces an element of uncertainty, the experience and calibre of Cross and Sergeant (who was instrumental in developing the trust’s original investment approach) should provide some reassurance over continuity. Net asset value is up 22.4% over the past year, so the new managers have a tough act to follow. If the new managers can maintain that momentum, Liontrust’s promised marketing support and the prospect of a further capital return should help address the persistent discount.”
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