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Why we are removing the Miton UK Multi Cap Income fund from our portfolios

Story published Feb 23 2020 

Readers of this website or our book may have heard about problems at a fund run by Miton, the investment management company that also oversees one of the funds included in two of our portfolios.

The problems involve the LF Miton UK Smaller Companies fund, which is not included in our portfolios. Another Miton fund, however, the LF Miton UK Multi Cap Income fund, is a member of our high income and compromise portfolios.

Should readers who have put money into this latter fund be worried? And if so, what should they do about it?

The first thing to say is that the poor performance of Miton UK Smaller Companies has not been shared by Miton UK Multi Cap Income. The first fund has, since a peak reached in the summer of 2018, fallen by about 28%. Our fund peaked at about the same time, fell to a much lesser extent, but has now recovered almost all those losses. Its price is now close to its highest level ever.

In short, we are not unhappy with the performance of our fund.

It’s also true that the two funds are very different: they invest in different stocks and have different aims. The Smaller Companies fund aims to produce capital gains and does so in a part of the market where the risks and the potential returns are both high.

The purpose of the UK Multi Cap Income fund, of course, is to produce income and this of itself tends to produce a different kind of fund, even though some of the holdings are smaller companies. Any stock that produces an income by paying a dividend has reached a certain level of stability and maturity; a stock or fund that pays an income is, in our view, generally less risky than one that doesn’t.

But the two funds the one we have suggested in our portfolios and the one that has fallen severely are run by the same pair of managers and this concerns us. At the very least, the problems at the Smaller Companies fund may be a distraction from running the other fund.

Because of this, we will take a safety-first approach and remove the Miton UK Multi Cap Income fund from our portfolios. We do this with some reluctance but feel it is the most prudent course of action.

We will shortly publish here the name of a suggested replacement. In the meantime, readers can redeploy the proceeds of selling the Miton UK Multi Cap Income fund into the other three funds of the same type that remain in our portfolios: Artemis Income, Ardevora UK Income and Montanaro UK Income. The money can be divided equally between the three.

You may also want to read: M&G Property fund and Prudential UK Property fund: What does their suspension mean for our portfolios?


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