Home Money TELLWORTH UK SMALL COMPANIES: Fund that buys when companies are ‘small’ (and sells when they are teenagers)

TELLWORTH UK SMALL COMPANIES: Fund that buys when companies are ‘small’ (and sells when they are teenagers)

0 comment
TELLWORTH UK SMALL COMPANIES: Fund that buys when companies are 'small' (and sells when they are teenagers)

All this has changed at British fund manager Tellworth. The company, created seven years ago by Paul Marriage and John Warren with the backing of investment boutique BennBridge, has just been bought by rival Premier Miton.

As part of the deal, Marriage and Warren, both fund managers, will remain while BennBridge will exit. Over the summer, Tellworth will leave its London offices and move to Prime Minister Miton’s offices in the shadows of St Paul’s.

“It’s a good decision for us,” says Marriage. ‘We are now part of a larger business with a strong balance sheet and a large sales force ready to market and sell our funds.

‘However, we have not simply been absorbed into the Premier Miton investment machine. Our five funds will remain as they are. For fund investors nothing will change.’

In terms of assets under management, Prime Minister Miton’s £10bn dwarfs Tellworth’s more modest £550m.

Marriage is the manager of the Tellworth UK Smaller Companies investment fund, along with Warren and James Gerlis. Launched in late 2018, it has assets worth £125m and invests in companies in the bottom 10 per cent of the stock market by market size. “We currently have 46 shares,” he says. ‘The average market capitalization is around £300m and the idea is to buy companies when they are toddlers and then sell them when they are teenagers, hopefully making a profit.

‘When a stock represents more than 3 percent of the portfolio, we tend to start selling it down. It’s unusual for us to have more than 4 per cent of the fund in a single individual stock.’

Using a rugby analogy, Marriage says the fund’s portfolio is divided into three teams. “At the top we have the first XV, our best performing stocks, but some of them are reaching the end of their usefulness,” he says. “Then we have the second XV, some of whom will make it to the first team, while the academy XV is made up of future first team players and those who don’t make it anywhere.”

Among its current first XV is training and education company Wilmington. The fund acquired a stake 18 months ago and has so far made a profit of more than 30 percent, against a backdrop of a “depressing stock market.”

1713051161 593 TELLWORTH UK SMALL COMPANIES Fund that buys when companies are

“I feel like there’s a lot more to come from this stock,” Marriage says. ‘It is a high quality business. “It could be bought by private equity at a large premium to its share price, which would be good for the fund, but we would prefer to continue holding it.”

Marriage and Warren adopt a six-month rule regarding property. In simple terms, if it doesn’t perform well in its first six months, it is discarded. “When investing in smaller UK companies,” says Marriage, “you want to avoid stocks that fall in value by 80 per cent or more.”

“Our rule reduces the chances of this happening by reducing losses early.” The companies that have survived or not broken this rule are the chain manufacturer Renold and the publisher Future.

The fund manager is wary of an imminent revival in the stock market fortunes of UK small companies. But he is encouraged to know that there are many buyers looking to acquire the companies in which he invests his fund.

“It’s not a bad time to have some exposure to smaller UK companies,” he says. Over the past one and five years, the fund has delivered respective returns of 10 percent and 19 percent. In three years, it has recorded losses of 15 percent. Annual charges are just over 1 percent.

You may also like