InvestmentsMay 21 2013

Marriage buys into esure flotation

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ByMatthew Jeynes

Cazenove’s UK small-cap equity star Paul Marriage has ventured out of his company-size comfort zone to buy into the flotation of insurer esure, in the belief it can take market share from bigger players.

Mr Marriage tends to invest in smaller niche companies such as Xaar, a leading producer of print-heads that he bought back “when no-one else wanted anything to do with it”.

But the top-performing manager invested heavily in non-life insurance company esure when it floated at the end of March 2013 with a market capitalisation of £1.2bn because of his conviction about the firm’s growth prospects.

He has since raised his initial 1.25 per cent weighting in the firm to 2 per cent and has already been rewarded. The share price has risen by 2.6 per cent since its share offering, in spite of losing value in the first couple of weeks as a public company.

Mr Marriage said he had bought into the share offer because “esure is the best run direct non-life insurance company in the UK”.

He said: “It has a fairly low risk-profile that we liked, it is conservatively managed with a sensible valuation, a good balance sheet and good cashflow.

“Yet the firm still has interesting growth prospects and there is a good chance for them to take market share from the likes of Admiral and Direct Line.”

The UK Smaller Companies fund is the best performing in the IMA UK Smaller Companies sector over the past three years, delivering a return of 114.9 per cent – more than double the sector average return of 55.4 per cent, according to FE Analytics.

In that time the fund has grown from £32m at the end of April 2010 to £502.9m as of May 15, according to Cazenove.

The manager said there was no set capacity limit for the fund but said “if we feel we cannot perform to the standard we expect then we might close, but I do not feel that we have reached that point”.

At the same time as buying into esure, Mr Marriage also invested in a smaller firm called HellermannTyton on its share issuance at the end of March this year.

HellermannTyton, which makes cable ties for industrial use, is an example of the niche companies that Mr Marriage favours in the fund.

“The firm is the market leader in the world for cable ties,” he said. “They manufacture the industrial versions of these things for sectors like automotives and aerospace, and there is growing demand for cabling these days – all those wires need to be kept in place by cable ties.