What I Bought Last
These are quality-growth investors working at a specialist UK smallcap house with a strong pedigree . Gresham House is split between private and public equity teams . The key differentiator for this fund is that Wotton and his team take a private equity approach to public markets , placing an emphasis on buying businesses rather than just shares . This means that after taking a large position in a smaller company , they will partner with its management to drive better operational and share price performance .
A high bar They only buy companies that are cash-generative , have low levels of debt and are relatively insulated from external factors . Wotton and his team have built a vast network within the UK small-cap space , which helps them thoroughly gauge the businesses they own and the industries they reside in . ESG is fully integrated into the process and , importantly , the managers pay greater attention to valuation than other quality-growth peers .
The fund ’ s focus on quality at a reasonable price allows it to perform well across the cycle . However , this means it will likely underperform in cyclical and high-growth rallies , although we would still expect it to deliver decent absolute returns . As asset allocators , we use LF Gresham House UK Smaller Companies alongside a high-growth fund and another deep-value one .
UK small caps are the long-term investor ’ s best friend , but finding an exceptional manager in this area whose fund hasn ’ t been bloated by inflows is difficult . However , Wotton and LF Gresham House UK Smaller Companies tick both these boxes .
Alex Paget is a fund manager at Downing
Issue 94 - April 2023 / 73 /