Marlborough Fund Managers has created a unit trust that focuses on companies with a market capitalisation of less than £50m.
The Marlborough UK micro cap fund aims for income and growth and will be managed by Giles Hargreave, who currently runs the Marlborough special situations and Marlborough UK leading companies funds. He will be assisted Guy Feld, an analyst who joined the team last March from Teather & Greenwood and George Finlay, who has worked with Hargreave for over 15 years.
The team will take a bottom-up approach to stockpicking and will visit the companies they are considering for the portfolio. Once selected, the stocks will be monitored by assistants Mark Chadwick and Joshua Ross-Field, who will notify the rest of the team if there are any changes.
The micro-cap sector is under researched compared with larger companies, as fund managers operating in the smaller companies market tend not to look at capitalisations of below £100m. This is good news for micro-cap specialists such as Marlborough as they can call on their contacts within the field to identify opportunities that other fund managers may not know about.
UK smaller companies have outperformed larger companies over the past year but rising interest rates, which have signaled an improvement in the economy, are more likely to have a negative impact on micro caps.
Micro-caps can be attractive because their growth potential is greater than larger companies, but this also means greater risk for investors and it may be difficult to find an exit route. However, the Marlborough fund can hold up to 10 per cent in cash to aid liquidity, so the managers will not be forced to sell holdings when investors want their money.