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Unicorn rides on wave of smaller companies

Unicorn Asset Management has established the Unicorn UK smaller companies fund, an Oeic which consists of a portfolio of 35 to 40 stocks.

The fund is the third fund in Unicorn’s Oeic range. It aims for capital growth and is benchmarked against the Hoare Govett Smaller Companies Index.

Peter Webb, founder and chief executive of Unicorn, is the manager of the fund. Webb will select stocks for the portfolio in relation to three themes, undervalued growth, quality cyclicals and special situations.

The stockpicking process will be contrarian, since Webb will tend to choose stocks that have fallen out of favour or where company restructuring has affected share prices. Stocks will be selected if Webb thinks the economic cycle will bring about renewed interest in them which increases their prices.

He will look for companies at the lower end of the Hoare Govett Smaller Companies index, that have good management, strong cash flow, dividend growth potential and good business strategies.

Webb has 12 years experience of managing smaller company funds and currently manages Unicorn’s eaglet investment trust. He also co-manages the Unicorn falcon investment trust with Paul Harwood.

Smaller companies funds have higher growth potential than mid cap and large-cap funds, but as the potential rewards increase, so do the risks. Some investors may feel that this fund is too risky during the current volatile climate. However, it may appeal to investors who already have core UK funds and who want to diversify.

According to Standard & Poor’s, the eaglet investment trust is ranked third out of 29 trusts based on £1,000 invested on a mid-to-mid basis with net income reinvested over three years to August 2, 2002.

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