Asset Manager Overview
Amati Global Investors (AGI) is an Edinburgh-based investment boutique that specialises in the analysis and management of UK smaller companies. AGI was formed in January 2010 when its CEO and one this fund's three managers, Dr Paul Jourdan, launched the business having undertaken a buy-out from his former employers, Noble Group. 51% of AGI is primarily owned by its staff members and their families, with the remaining 49% owned by Mattoli Woods (MW). In March 2024, MW received a bid from a private equity vehicle managed by London-listed Pollen Street Capital. This achieved shareholder approval in April with the deal ratified by the FCA in July 2024. There has been no further update on the longer term impact this may have on this strategy or the wider AGI business.
Fund Manager/Team Overview
Dr Jourdan has a long association with this strategy having managed the fund since 2000. He was joined by fellow managers, David Stevenson, in 2012, and Scott McKenzie, in 2021. Both are experienced investors having joined AGI from Cartesian Capital and Saracen Fund Managers respectively. We would highlight that the addition of Mr McKenzie as a named manager was in recognition of the need for further resource given the increase in assets following the strategy. The fund managers are also supported by analyst Dr Gareth Blades, who joined the firm in 2019.
Investment Philosophy & Process Overview
The investment approach employed has been built to support the firm's philosophy that superior returns can be achieved by investing in high quality companies and holding them for the long term. The investable universe is reduced through an initial screen that considers factors such as each company's cash return on capital, how much of its revenues are converted into cash, its level of debt and if its earnings can grow by at least 10% pa. The team can also introduce further ideas by drawing on its work with young and very small companies through its management of Venture Capital Trusts (VCTs), as well as a list of trusted brokers. The initial screens and other sources of ideas greatly reduces the list of potential investment to around 300 companies. In keeping with the team's mantra of investing into quality companies a great deal of emphasis is placed on a firm's competitive advantage, its business lines, if it has pricing power and an incentivised management team that has a good track record of sensibly allocating capital. Balance sheet and cashflow analysis are integral parts of the stock selection process with the aim to ensure that companies are financed appropriately for the nature and cyclicality of their underlying businesses. The team also believes that engagement with company management is key and retain a close level of dialogue with management teams. This includes regular updates, site visits and telephone calls.
The final portfolio is typically invested across 60-70 holdings, although this can vary depending on the managers opinions of opportunities in the market, and bears little resemblance to the fund's benchmark, the Deutsche Numis Smaller Companies plus AIM (ex investment companies) index. New ideas entering the portfolio are scrutinised by the other team members and are debated with the proposing manager having to be supported on the idea by at least one of the other managers. Position sizing is based on conviction, with new holdings tending to enter the portfolio at 1-2% allocations, which can be lifted to 4% depending on liquidity. Maximum stock exposures are limited to 5%. The managers aim to remain fully invested throughout, but do adjust the portfolio to take advantage of, or to protect from, macroeconomic and/or political issues.
The fund is managed with a long term view and sales are generally made when the original investment thesis no longer applies, when an idea offering a superior risk adjusted return replaces an incumbent position, when there has been a deterioration of governance within a business or when a company is no longer within the investible universe, for example if it becomes too large.