Fund of the week: An unconventional approach to income
Feb 10, 2012
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With most income funds you can be pretty sure of the types of companies you’ll be investing in before you even look at the fact sheet. The usual suspects are large behemoths in defensive industries, such as BP.
But it doesn’t have to be like that. The Unicorn UK Income Fund targets small and medium-sized firms that pay dividends. So far its unconventional approach has paid off and the firm is top of the income sector over three years.
That’s “a fine record for a firm established in 2000”, says Tanya Jefferies in This is Money. “Independently owned and independently minded”, it’s a “UK income fund with a difference, which has succeeded in doubling investors’ money over three years”. Over five years, Unicorn UK Income Fund is up 24%. That might not seem too impressive, but the income sector average over the same period has been a loss of 2.4%.
Manager John McClure focuses on firms with strong overseas earnings and low levels of debt. “We are not in favour of highly-geared companies at the moment,” he says. “We like businesses that are pretty predictable, soundly financed, with products we understand.”
One favourite is flooring firm James Halstead. McClure stresses that it has no connection to the British housing market, which he thinks is due a fall. It’s a worldwide supplier of non-slip linoleum flooring to public buildings. “It’s a family-run business, very soundly financed, with cash on the balance sheet,” says McClure. “It has a competitive advantage because the pound is quite low compared with the euro.”
Contact: 020-7253 0889.
Unicorn UK Income Fund top ten holdings
| Name of holding | % of assets |
|---|
| Castings |
5.5 |
| Brewin Dolphin Holdings |
5.2 |
| James Halstead |
5.1 |
| VP |
5.0 |
| British Polythene Industries |
4.5 |
| RPC Group |
4.4 |
| Mucklow (A&J) Group |
4.4 |
| Arbuthnot Banking Group |
4.4 |
| Acal |
4.0 |
| Phoenix IT Group |
3.9 |
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