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Categories:Investments

Acuim puts spotlight on smaller firms

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MAM Funds - Acuim Multi-Cap Income Fund

Type: Oeic

Aim: Income and growth by investing in the equities of quoted UK companies with a bias towards small and medium-sized companies

Minimum investment: Lump sum £1,000

Investment split: 30-65% Aim and small/micro-cap stocks, 20-50% FT Midcapstocks, 5-30% FTSE 100 stocks

Isaeligible: Yes

Charges: Initial 3%, annual 1.5%

Commission: Initial 3%, renewal 0.5%

Tel: 0118 338 403

This fund invests mainly for income in quoted UK companies, with a bias towards small and medium sized companies.

Michael Philips proprietor Michael Both says: “This new Acuim fund, part of the MAM Oeic stable which includes Miton and Midas, may invest in any UK market cap where it believes the company will grow dividends at a faster rate over the long-term compared to other funds in the sector.

The long-term target yield is variously stated as between 4 and 5 per cent and above 5 per cent, all rather optimistic if interpreted as net of charges. Fees and costs are charged against capital so all dividend income can be paid to the investors, but this automatically risks obscuring capital erosion.”

Both points out that the fund is not constructed or managed against a specific index or benchmark, which he thinks will make it harder to assess its success.

“Gervais Williams, the lead manager, has a good background in smaller companies and believes that a proportion of small and mid-cap holdings increases the potential for the fund to grow the initial rate of dividend at a faster rate over the long-term when compared to other funds that invest predominantly in large cap stocks but the corollary is higher volatility.”

Both adds that Gervais Williams has been associated with very successful smaller company funds in the past, so Acuim UK Multi-Cap Income is a risk but not reckless. “It is being launched when markets are in turmoil which will quickly expose how skilful the management are at stock-picking,” says Both.

Turning to the potential drawbacks, Both says: “The fund plans to hold 80 to 120 companies which appears quite diversified. But since the investment universe is confined to the UK, the manager will need to work hard to find companies whose fortunes are not closely correlated not only with each other but also the broader market index. This number of holdings could be expensive unless the Oeic achieves a decent size.

“The fund may also invest in collective investment schemes, cash, money market instruments, other transferable securities and derivatives and forward transactions but it is not made clear on what basis and whether this will be to reduce portfolio volatility, for hedging or indeed any other purpose,” he says.

Both expects competition to come from the MFMSlater income and Marlborough multi-cap income funds, along with many long established high income funds.

Summing up, Both says: “Investors need to be very clear that with charges coming out of capital and a target dividend rate of more than 4 per cent their capital will probably be eroded faster than it is replenished.

“i-Shares FTSE UK Dividend Plus, which is exposed to the 50 highest yielding FTSE 350 stocks, recently had a distribution yield of 5.26 per cent with a TERof only 0.4 per cent.”

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