Aim: Growth by investing in UK smaller companies
Minimum investment: Lump sum £1,000, monthly £100
Investment split: 100% in UK smaller companies
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5%, annual 1.5%, 20% performance fee
Commission: Initial 3%, renewal 0.5%
Tel: 0800 294 6820
Smaller companies specialist Octopus Investments has introduced the CF Octopus opportunities fund, an Oeic that invests in smaller UK companies using the non-Ucits retail scheme structure.
The fund aims for growth by looking for pricing inefficiencies within smaller companies. It will invest in companies with a full market listing alongside those on the Aim and Plus – formerly Ofex – markets.
AWD Chase de Vere research manager Justine Fearns says: “Octopus is well known for good quality products and for being forward thinking and innovative. The launch of the CF Opportunities fund continues this trend and is perhaps an example of how the company is broadening the base of its offering.”
The fund sits within the UK Smaller Companies sector but Fearns thinks it is not typical of its peers as it focuses mainly on companies with a market cap of below £100m. “Octopus believes this is a very under-researched area of the market and, given that 70 per cent of all quoted companies including Aim have market values of less than £100m, it should offer plenty of investment opportunity,” she says. She feels the result should be a fund that complements other smaller companies holdings and helps diversify within a portfolio.
Fearns notes that Richard Power and David Crawford, who will be running the fund, have experience in managing Aim portfolios and traditional small cap funds. They will run the portfolio to a concentrated level of 30-50 stocks.
“This all sounds a little specialist so has the fund management team at Octopus Asset Management got what it takes? It would appear so. Octopus has previously focussed on VCTs and Eis/Aim portfolios, which means it naturally favours the very small end of the market and it has appointed managers to work in its business accordingly. It has a good track record with the majority of products it has brought to market so we can see that things have been working well to date,” she says.
Fearns feels that the timing of the launch could have been better, with most commentators stating that bigger companies is the place to be, at least in the short term. “However, as the fund offers diversification by investing in potentially under-researched, high growth areas, it should still attract money,” says Fearns.
Fearns regards the commission and charges as standard although there is a performance fee that pushes the cost up. She says it means the fund may not be considered by some people, not least because it is unlikely to feature on many fund platforms.
Discussing the less attractive aspects of the fund Fearns says: “It is a very specialist product due to the market cap of the underlying investments so we would not expect it to be open forever. It is likely to be soft closed at some point but as it is specialist and investment amounts tend to be smaller into specialist products, we wouldn’t expect this to be too soon.”
She concludes that there are few similar funds within the UK Smaller Companies sector but suggests Close beacon as a possible competitor.
Suitability to market: Average
Investment strategy: Good
Adviser remuneration: Average