A TRIO of AAA-rated managers from Edinburgh’s Amati Global Investors has topped The Herald’s latest league table of Scottish fund managers after making it into the upper ranks of financial information group Citywire’s listing of over 3,500 global managers.
Paul Jourdan, David Stevenson and Douglas Lawson, who collectively manage the Amati UK Smaller Companies Fund, were in joint first place after ranking at number 87 in Citywire’s global list.
That places the managers 456 places higher than their nearest Scottish rival in the global table, Kames Capital’s AA-rated Stephen Snowden, who slipped from position 468 to 543 in the overall list.
The rankings are based on risk-adjusted performance over a three-year period, with the latest table covering the three years to the end of April.
According to Mr Jourdan the risk-adjusted nature of the table has worked in Amati’s favour, given that he and his colleagues do not invest “at the risky end of the market”.
“The way the fund has evolved, about five years ago we made the decision to address the fund to those retail investors who want exposure to smaller companies but who want sensible exposure to them,” he said.
“We tend to be at the lower-risk end, which is why in a table like this we will tend to do well. We’re not aiming to be the raciest smaller companies fund out there.”
Typically the portfolio will hold between 50 and 70 stocks, which are split evenly between companies listed on the alternative investment market (AIM) and the main board of the London Stock Exchange.
Although there is less regulatory oversight of businesses that are listed on AIM, Mr Jourdan said the view that that makes them inherently more risky is incorrect, with some of the fund’s most robust investments coming from the junior market.
“There’s a very old-fashioned view that being on AIM is too risky,” he said.
“It’s a huge market and it has some crazy risks but also some of the best businesses in the country. To avoid it would be an utterly self-defeating and illogical move.”
As Amati also runs a number of venture capital trusts (VCT) that invest specifically in AIM-listed companies, Mr Jourdan said the team can get to know businesses well before deciding to include them in the Smaller Companies Fund.
This was the case with Keyword Studios, a service provider to the video games industry that was added to the fund after being held in Amati’s VCTs for a year following its 2013 listing.
“They work for major games producers and started out doing localisation - if you produce a game for the US market but want to sell it into Europe you’ll want to change quite a lot about it such as the language, scenery, clothing and cars,” Mr Jourdan said.
“To do that requires an international business - you need some scale and local expertise to make it relevant to the customers.
“Keyword Studios floated on AIM as quite a small business. The reason we liked it was that for three years before it floated the management team proved that they had a very strong business case and it was a niche that could be consolidated.
“They recognised that the big video companies don’t want to use lots of small players, they just want two or three.”
The company’s shares, which were trading at around £1.40 at launch, are now at around £8. Similarly, Fever-Tree, which makes tonic water and other mixers, floated in 2013 with a share price of under £2 and has since seen its stock rise to £17 per share.
“That’s an example of the kind of thing we are after,” Mr Jourdan said. “It’s a high-quality, UK-based growth company.
“The management team behind it had been in the global drinks business and understood how distribution works.
“There are lots of companies out there with great tonic waters and mixer drinks but Fever-Tree works because they understood the distribution business.
“They also identified that the premium gin market had really taken off but mixers hadn’t really changed at all.
“They realised there was a gap in the market to have a premium mixer to go with those expensive gins.”
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