Smaller company investment specialists Aberforth Partners has unveiled a split-capital investment trust that will invest in between 60 and 100 UK smaller companies.
The Aberforth geared capital and income trust has both income shares and capital shares, with a planned lifetime of 10 years. The income shares have an initial target yield of 8 per cent a year, but this is expected to rise over the lifetime of the trust. The capital shares will provide growth after the income shares have been paid out.
Aberforth specialises in a value style of stockpicking, which looks at companies that are trading below what the fund manager considers their real value. This may occur where the tide of the stockmarket turns against sectors or companies for different reasons. For example, travel companies suffered in the aftermath of the terrorist attacks in the US, but they may represent good value over the long-term.
This investment trust will diversify across a range of sectors in the UK smaller companies universe as defined by the Hoare Govett Smaller Companies Index, excluding Investment Companies, which represents the smallest 10 per cent of UK companies in terms of market capitalisation.
Smaller companies are a good prospect as although the UK economy has slowed down, growth is expected to be stronger in 2002 and smaller companies will benefit from this more than larger companies which have a global outlook. With many stocks underpriced as the result of falling stockmarkets, this investment trust could have a wealth of investment opportunities to choose from. However, smaller companies can be risky and investors must rely on the fund manager's views of the true value of a company, which may again involve risk.
According to Standard & Poor's, the Aberforth smaller companies investment trust is ranked 6 out of 29 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over three years to December 4, 2001.