Paul Marriage has generated substantial outperformance in a variety of market conditions since taking control of this fund in 2006, though he has proved particularly effective during falling markets. He takes a common sense approach, generally looking for good businesses but also for an investment angle that will cause their share price to be re-rated. He is also pragmatic enough to include poor quality companies in the portfolio if he believes they are sufficiently undervalued.
The fund is constructed using an entirely bottom-up process; sector positioning is not a focus. The portfolio is spread widely across the investment universe, defined as the bottom 10% of the small-cap market by capitalisation, including AiM. The manager aims to have 75% of the portfolio in core holdings matching his "P3M criteria":
Product – a differentiated product, R&D backed and preferably with intellectual property.
Market – a market leader, either for the UK in a large niche or globally in a small niche.
Margin – profitable, cash generative companies that are growing margins.
Management - Marriage looks for management that appreciates shareholders and own their own stock. He likes to meet each portfolio company twice a year, ideally on their own premises.
The remaining 25% of the portfolio is invested in value situations, often "poor" companies that the market has mis-priced. Regardless of the company he also requires an "investment angle" - a catalyst such as a restructuring that will cause an uplift in the share price. Ideas are sourced from market knowledge gained at company meetings, the "library" of companies Marriage has met in previous years, fundamental research and from regional brokers. The roles of fund manager and analyst are combined, without the need for large teams of sector specific analysts.