River & Mercantile UK Micro Cap

Last updated 24 May 2019

A highly concentrated trust with a strong track record since inception in 2014...

Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

River & Mercantile UK Micro Cap

River and Mercantile UK Micro Cap (RMMC) aims to achieve long-term capital growth from investment in a diversified portfolio of UK micro-cap companies, typically comprising companies with a market cap of less than £100 million at the time of purchase.

The company launched in December of 2014, and now has George Ensor at the helm who took over the portfolio from Philip Rodrigs in 2018. The team utilise an active, bottom-up strategy looking to add real value in the micro-cap end of the market via in-depth analysis where coverage is sparse. Like all managers at River & Mercantile, George follows the group’s PVT (Potential, Valuation, Timing) investment approach.

As of the end of March 2019 the portfolio is relatively concentrated, with only 43 holdings, but the managers believe it boasts a well-diversified array of companies. Not only is the portfolio evenly split among the small to micro market cap spectrum, the companies are fairly evenly split among the sectors. Only financials has a weighting greater than 20%, and the largest sector overweights come from oil and gas (+8.2%) and health care (+6.2%). At the other end of the spectrum, the portfolio has very little exposure to consumer services and consumer goods (-11.3% and -6.4% relative to the benchmark, respectively).

Since launch the trust has delivered NAV returns of 96.2%, compared to 40% for the Numis SC Plus AIM ex Invt Cos Index, 60% for the AIC peer group and 60.4% for the IA peer group. As such, the long-term track record is strong. However, the last quarter of 2018 hit the portfolio particularly hard and saw the company fall 21.7% in NAV terms.

As with most UK focused trusts, the past few years have seen the discount widen dramatically – although in this case, exacerbated by the change in manager in early 2018. Over the past two years the trust has reached a premium of close to 17%, and a discount of close to 15%. Currently the trust is trading at a discount of around 14%, considerably wider than the sector average.


William Sobczak
William joined Kepler Partners in February 2018 as an investment trust analyst. Prior to joining, William graduated from the University of Western Australia, with a BSc in Psychology.

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Key facts

Investment objective

River and Mercantile UK Micro Cap (RMMC) aims to achieve long-term capital growth from investment in a diversified portfolio of UK micro-cap companies, typically comprising companies with a market cap of less than £100 million at the time of purchase.

As at:

22/05/2019

Group/Investment

River and Mercantile UK Micro Cap

Ticker

RMMC

Management Company

River and Mercantile Asset Management

Manager Name

George Ensor 

Association of Investment Companies (AIC) Sector

UK Smaller Companies

12 Mo Yield

-

Dividend Distribution Frequency

-

Latest Market Capitalisation

£77,098,771

Latest Net Gearing (Cum Fair)

-

Latest Ongoing Charge Ex Perf Fee

1.25%

Turnover Ratio

-

Shares Outstanding

46,445,043

(Discount)/ Premium (Cum Fair)

15%

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