Teather & Greenwood has drawn on the experience of its venture capital trust (VCT) manager for the introduction of its UK smaller companies fund.
This Oeic will be managed by John Sweet, who is responsible for Teather & Greenwood's alternative investment market (Aim) VCT. The new fund aims for long-term capital growth by investing in around 60 smaller quoted and Aim-listed companies. These companies will be expected to have a market capitalisation of up to £800m and will diversify across industrial sectors. Sweet will seek out companies that appear to have strong management teams, good earnings potential, strong balance sheets and promising dividend growth.
Smaller companies tend to operate on a domestic level rather than the global stage and the present economic conditions, which are positive compared to other parts of Europe, could see UK smaller companies thrive. Low interest rates and high consumer confidence are likely to benefit smaller companies more than larger multi-nationals, just as the effects of recession are worse for smaller companies without global resources.
The experience of the fund manager may encourage investors who are looking for high potential returns and higher risks to consider Teather & Greenwood's UK smaller companies fund as an interesting option.
However, nervous investors who are just starting to regain their confidence may not take this type of fund at present. The Hoare Govett Smaller Companies Index, which measures the smallest 10 per cent of UK companies in terms of market capitalisation, started 2001 at 4635.13 points. This had fallen to 4031.79 points by the end of the year. The index reached an all-time high of 5000.22 points in March 2000, during the technology boom.
Some investors may have bought smaller companies funds during the technology boom, when funds were overweight in technology and this may discourage them from the Teather & Greenwood fund.