UBS Global Asset Management has established the UK smaller companies fund, an Oeic that invests for capital growth.
The fund will hold between 50 and 100 stocks, although typically it will have 75 holdings. The stocks will be selected from the bottom 10 per cent of companies on the Hoare Govett Smaller Companies Index, which measures
companies in terms of market capitalisation. The stocks chosen by UBS are likely to have a market capitalisation of below £650m.
Former Gartmore UK smaller companies fund manager Frank Manduca will run the UBS fund. He joined the company in 2002 and has more than 17 years' investment experience. Manduca will be assisted by the three-strong UK smaller companies team at UBS, and will also draw on research provided by 19 UK analysts.
Manduca and his team will invest across a broad range of sectors and will look for smaller UK companies that appear undervalued. However, they must be satisfied that the value of the chosen stock is likely to increase in the future. For example, some larger stocks will have slipped into the smaller company universe as a result of difficult economic conditions and this could provide growth opportunities if they recover. Other indications of an improvement in stock values include a change in the company's management, business strategy or higher profit margins.
UK smaller companies stocks are currently looking cheap as a result of the global downturn. It is an area that could provide good returns as smaller companies to be less researched than larger companies and are more likely to benefit from a recovery in the domestic economy. This is because larger companies often operate on a multi-national level, so global influences will dilute the impact of economic improvements in the UK.
According to Standard & Poor's the UBS UK select fund is ranked 292 out of 304 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to March 3, 2003.