Marlborough Fund Managers has introduced a UK equity income fund that focuses on small and medium sized companies.
The Marlborough multi cap income fund is the first equity income fund for Marlborough’s smaller companies specialist Giles Hargreave. Hargreave, who runs Marlborough’s special situations, UK leading companies and UK micro cap growth funds, has worked with co-manager Siddarth Chand Lall since 2007.
The new fund aims to produce income and growth by investing in around 75 companies listed on the FTSE 250, FTSE SmallCap, FTSE Fledgling and FTSE Aim indices, with some smaller companies from the FTSE 100. It was launched to offer equity income investors something different to FTSE 100 focused portfolios that often hold many of the same blue-chip companies.
The Marlborough team will look for small and medium sized companies that pay attractive dividends that grow each year and have stronger long-term capital growth potential than FTSE 100 stocks. The managers are targeting a gross yield of 3.5 per cent in the first year and average dividend growth of 10 per cent a year.
Smaller companies are often under-researched so can be picked up an attractive price relative to their full potential. However, the fund is likelyto be more volatile than the average UK equity income fund due to its smaller company slant.
Defaqto insight analyst for funds Fraser Donaldson says: “There is a slight departure from Hargreave’s usual process in that solid dividend paying prospects is one of the priorities for the fund, his knowledge of the sector means there is no reason the fund should not succeed, particularly as the income target is not overly demanding.
“Income producing vehicles are at a premium at the moment with low returns on cash, and investors are accepting they need to take on some risk to achieve income returns. To mitigate against some of this risk, diversification within an asset class and across asset classes is important. This fund may complement other equity income funds in a portfolio that may have a bias towards bigger companies.”