Saracen Fund Managers has launched a UK income fund aimed at investing in small and mid-cap companies.
The fund, which have an investment horizon of five years, will have a concentrated portfolio with typically 30 to 45 holdings. At launch the small and mid-cap companies exposure represents over 70 per cent of the portfolio.
Yield at launch is 4.2 per cent, or around 115 per cent of that of the FTSE All Share index, according to the investment boutique.
The fund is managed by Scott McKenzie who has run UK equity income portfolios for 20 years.
Saracen Fund Managers chief executive Graham Campbell says: “Against a backdrop of subdued levels of yield across asset classes, the demand for income-producing investment products has never been higher. While there is a proliferation of equity income funds, the Saracen UK Income Fund is marked out by its flexible approach, wholly unconstrained by index considerations.”
Saracen is likely capitalising on the peak in interest for equity income funds, as interest rates mean investors struggle for income. Equity income is one of the most popular sectors for fund sales recently, according to IA data.
In February, UK Equity Income was the second-best performing IA sector, for the eighth consecutive month, with net retail sales of £248m.
Campbell says the focus on small and mid-cap companies makes the fund ”an excellent diversifier” from other funds in the sector that might have a high exposure to the same FTSE 100 stocks.
“We anticipate constraining capacity on this fund to ensure it can remain true to this focus,” he adds.
The fund will initially charge 0.5 per cent on the first £50m of assets raised across income and accumulation classes.
The Edinburgh-based company began managing assets in March 1999 with the launch of Saracen Growth Fund, an OEIC sub-fund. The Saracen Global Income and Growth Fund was launched in June 2011.