18th May 2016 09:02
LONDON (Alliance News) - River & Mercantile UK Micro Cap Investment Company Ltd doesn't necessarily count market volatility as a foe to successful small-cap investment, portfolio manager Philip Rodrigs said on Wednesday.
Managed by River and Mercantile Asset Management LLP, the London-listed entity invests in UK micro-cap companies, typically valued at below GBP100 million by market capitalisation when purchased.
In a statement, Chapman said the portfolio manager delivered "exceptional performance" in the six months ended March 31. The company's net asset value - the difference between its assets and liabilities - stood at GBP1.1785 per share as of March 31, up from GBP1.1036 on September 30, 2015. Its share price rose to GBP1.1300 from GBP1.0400 in that time.
"By the middle of February, UK markets were down 10% to 11%, whereas the company's NAV has fallen less than 5%. By the end of the quarter performance was positive with NAV rising 0.4% which was ahead of the benchmark which finished down 1.3%," Chapman said in a statement.
"The main frustration, therefore, is that the share price, having tracked the NAV lower, failed to rebound in lock-step with the recovery of the NAV, repeating the pattern seen last September," the chairman said.
Rodrigs said the investment performance in the six months was strong at positive 8.3%, well ahead of the benchmark's return of positive 0.9%. The benchmark is the Numis Smaller Companies +AIM excluding investment companies.
"Volatility is the friend of the active investor, and as the first half has shown, not necessarily the foe of the micro cap section of the market," Rodrigs said.
"The resilience seen is in part due to the ongoing discount valuation experienced by many micro caps. These low starting valuations entering into a volatile period naturally provide an element of protection for share price performance compared to stocks that enter such a period with over-inflated valuations," Rodrigs said.
"Meanwhile the underlying economic conditions remain relatively stable, thereby allowing individual companies to continually further their growth or recovery trajectories. As such we continue to look forward to delivering attractive long term returns into the future," he added.
Shares in River & Mercantile UK Micro Cap were down 1.7% at 116.54 pence on Wednesday. The stock is down 2.6% in 2016 to date.
By Samuel Agini; [email protected]; @samuelagini
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