Fund Manager Focus by Rob Langston

The MFM Slater Growth Fund, managed by Mark Slater, would, according to FE Analytics, have returned £2,269 since launch in 2005, on a net income reinvested, total return basis, from an initial £1,000 investment. The small- and mid-cap biased fund aims for long-term capital growth through investment in the universe of UK-listed companies.

By utilising his bottom-up approach to investing, the manager has won plaudits in the media and from the investment community as a whole.

‘The approach isn’t sector-specific; it’s a bottom-up focus and very much a pure growth fund,’ he explains. ‘We include those companies that are growing and those that have growth drivers. They are typically niche businesses but in a range of business [areas], and they are quite often global.’

This disciplined approach to investing has led to the fund manager identifying a number of opportunities within the small-cap space and, although he holds a number of companies in common with many other funds in the sector, he has generated an impressive track record.

Largest holding
At the end of June, the £44.5 million fund’s biggest holding was pharmaceutical and health care company Hutchison China Meditech – 8.55 per cent of the portfolio. Slater says the UK-listed company is primed for further growth in the near future.

‘We like the fact that it has quite a lot of different exposures to companies in China,’ he says. ‘We think it’s a much safer way of being exposed to the Chinese consumer and a safer way of being exposed to Chinese growth.’

Slater says healthcare spending in China will increase as consumers become more affluent, which Hutchison will benefit from. He believes that the company could also stand to benefit from becoming the partner of choice for Western brands aiming to crack the Chinese market thanks to its links to Hutchison, which has a great distribution capability.

Seeing the light
Another company Slater is bullish about is the LED (light-emitting diode) provider Dialight, which he continues to favour despite a recent rise in its share price.

He says the company’s products are sought after as they require less power than conventional bulbs and last a lot longer.

‘They’ve broadened their business into industrial lighting, which is a much bigger market,’ he explains. ‘It’s got great potential to be much bigger.’

Slater says, although the company has done well more recently, it has the potential to keep growing. ‘It has a strong balance sheet and ticks a lot of boxes for us,’ he adds.

Peppa Pig rights owner Entertainment One is also one company the fund manager is more positive about. He says that, as well as owning the rights to the popular children’s animation, it has recently concluded a £10 million annual deal with LOVEFiLM.

Slater says the company carries little debt and has good growth prospects, and predicts that sales of Peppa Pig merchandise in the US will also help buoy the company next year.

Three other companies favoured by the fund manager are oil and gas services business Cape, specialist camera manufacturer Andor Technology and hi-tech tools and systems maker Oxford Instruments.

Slater is slightly less bullish about technology company Globo, thanks in part to its exposure to Greece. He says the company is unlikely to become a major holding in the portfolio but believes management could yet improve.

The international aspect of the portfolio allows Slater to gain exposure to faster-growing economies outside the UK. Indeed, many of the companies in the portfolio are not dependent on the anaemic economic growth in the UK, Slater notes, with businesses more focused internationally.

‘Most of the companies we tend to own are not really UK businesses, although they may sell into the UK,’ the fund manager explains.