Andrew Jackson, who succeeded the high-profile duo of George Godber and Georgina Hamilton as managers of the Miton UK Value Opportunities fund, has revealed how he has turned around the performance of the £313m mandate.
Mr Godber and Ms Hamilton announced their departure from the Miton UK Value Opportunities fund in April 2016, when it was more than £800m in size.
Mr Jackson took the helm in July 2016, with the fund in the bottom quartile of performance for that calendar year.
Over the past 12 months, all of them with Mr Jackson in charge, the fund has returned 19 per cent, compared with 12 per cent for the average fund in the IA UK All Companies sector in the same time period.
The fund manager said that since taking over, he has changed around 50 per cent of the holdings.
He said: “The portfolio was quite obviously positioned when I took over, for the UK to stay in the European Union.
"There was a lot of exposure to the UK consumer that had impacted performance.
"So in the first three months I made some big changes to broaden the portfolio."
Mr Jackson has increased the fund’s exposure to the industrial and technology sector, and to companies with substantial overseas earnings.
An example of a company that is a self-help story, and on which he is particularly keen, is supermarket group WM Morrison.
The fund manager said he doesn’t buy the cyclical argument for supermarket stocks, which is that rising inflation will help those companies grow their margins, with demand remaining static because food is a consumer staple.
Instead he has invested in Morrisons because he said the management have pursued a strategy of being a food processor to other retailers, and recently signed a deal to supply the McColls corner shop chain.
Mr Jackson added that Morrisons has an advantage over many of its rivals because its stores are typically smaller in size, and so cost less.
Alasdair McKinnon, who runs the £844m Scottish Investment trust, another fund with an orientation towards value, said his favourite investment in the UK supermarket space is Sainsbury, as he feels the company does not compete for the same customers as Aldi and Lidl, the discount retailers, and so is less vulnerable to the competition in the sector which has driven down returns.
He said his early experiences in the City, which dates back to the 1980s, taught him that simply buying sectors because they are cheap is not a route to return.
Miton's Mr Jackson said when he began his career textile companies was a significant part of the stock market, but those have all disappeared, indicating that companies that are cheap can be cheap for a reason, and are in decline.
His interest in the textile industry has survived enough for him to have Coates Group as one of his largest holdings.
The company makes thread, used in garments and running shoes.
Mr Jackson said the company is a self-help story because it is finding new applications for its products, allowing the company to grow regardless of the global economy.
david.thorpe@ft.com
