Unicorn Asset Management – Falcon Investment Trust
Type: Investment trust.
Aim: Growth by investing in UK smaller companies.
Minimum investment: Subject to negotiation with stockbroker.
Maximum investment: No maximum.
Investment split: 100 per cent in UK smaller companies.
Types of share: Ordinary.
Isa link: Yes.
Pep transfers: Yes.
Redemption date: None.
Charges: Initial subject to negotiation, annual 1 per cent.
Tel: 020 7253 0889.
Broker Panel: –
Roy Andrews - Senior partner, Andrews, Gwynne and Associates
Ben Yearsley - Investment manager, Hargreaves Lansdown
Michael Both - Proprietor, Michael Philips
Robert Graham - Associate partner, The Scottish Financial Independence Group
Broker Ratings: –
Investment philosophy 8.8
Past performance 9.0
Company's reputation 8.8
Product literature 7.3
Unicorn Asset Management has introduced its falcon investment trust, investing in UK smaller companies.
Looking at how the trust fits into the market Yearsley says: "It looks at companies with market caps of between £150m to £1bn which places it firmly in the spotlight for any investor wanting a smaller companies fund. It is highly likely that the majority of investments will be at the lower end of the market cap scale."
Both believes that the UK smaller companies investment trust market is quite crowded. Conversely Graham thinks it fits in at the larger end of the smaller companies market, which can be hard to access through collective investments.
Andrews says: "It brings proven expertise to a slightly higher level than normal small companies investment, verging on the highly important mid 250 sector. To expand on the Eaglet style, using larger companies, it fills the gap currently existing in the market, using the proven methodology of Eaglet."
Identifying the type of client the trust would be suitable for Graham says: "The sophisticated investor with good core holdings, looking at capital growth over seven years plus."
Andrews says: "A client with a well balanced portfolio, perhaps lacking in small to mid cap exposure, who requires further opportunities for capital appreciation over the medium term."
Yearsley thinks that it would be suitable for anyone who is looking for explosive smaller companies growth from a fairly concentrated portfolio of stocks. Both thinks its for clients who are aware of the thrills and spills of investing in equities.
Both goes on to say: "It is refreshing to see a product which is not obviously based purely on investor's naivety, namely at the top of a three year bull run. The market is certainly still turbulent at the moment, but probably nearer the bottom than the top."
Turning to the marketing opportunities that the trust will provided Yearsley says: "Investment trusts are never particularly easy sells to clients especially when trading at a premium, however, the stunning track record and generally poor quality of the majority of competition makes marketing easier."
Andrews thinks the company's wish for accentuation of asset allocation in small to mid-cap companies, will allow the fund to be used for rebasing clients' portfolios where necessary.
Both says: "It could be good for Isa investors, especially with a self-select wrapper such as Transact. I'll buy it."
Analysing the main useful features and strong points of the trust the panel all point out the experience of the management team. Yearsley says: "Peter Webb has excelled at the very small end of the market - micro cap."
Graham says: "It provides an opportunity to access companies not widely researched by brokers and has a wide spread of holdings."
Both says: "It has clear objectives and low fixed overheads." Andrews points out the ability to take investments of £7,000 for Isa use and the methodology employed by the fund.
Looking at the investment philosophy Graham believes it's likely to produce good returns for the investor who can wait for profit.
Both says: "First class and they are doing it based on experience, not simulation. By aiming for a less heavily researched market sector, the opportunities for profit should be greater."
Yearsley thinks with the investment philosophy: "You are placing a lot of faith in the management, their style allows them to purchase pretty much anything they want. However, the most important factors appear to be strong fundamentals and an experienced and motivated management with companies supplying growth markets, not a guaranteed winner every time, but a good start."
Turning to the trusts disadvantages Both says: "In common with all new investment trusts, there is a danger that the share price will fall below the net asset value initially, but this should stabilise."
Graham says: "Two hundred and seventy five shares is a lot, this will require alertness from the managers."
Andrews says: "The investment's criteria have very broad ranges, from £150m to £1bn. However, this could also be a strong point. Perhaps at two hundred and seventy five the universe of target companies which is grossly under researched is too large for the investment team adequately to research."
Commenting on Unicorn Asset Management's reputation the panel give it the thumbs up, particularly, in the smaller companies sector.
Yearsley says: "It has an excellent track record managing both closed and open ended funds, smaller companies, as well their income fund. Unicorn are capitalising on this at the moment by raising a venture capital trust as well as this investment trust."
Yearsley goes on to say: "Unicorn are one of the hot shot fund managers around at the moment. Eaglet is one of the only smaller companies investment trusts trading at a premium - some feat considering that it invests in companies with market caps of under £50m."
Turning to Unicorn's past performance Andrews says: "First class, particularly when looking at the performance of the individual managers."
Both thinks the trust builds upon their existing areas of expertise, which, all other things being equal, gives investors more chance of profit.
Graham says: "Impressive with surprising consistency in a volatile market. They have avoided 'the lemons' very well."
Looking at the main competition Andrews and Both highlight Eaglet and Gartmore Fledgling.
Yearsley says: "In the investment trust sector there is very little competition, Liontrust Knowledge investment trust is really the only competition."
Graham says: "No direct competition. Henderson smaller companies is well established in a similar area."
Commenting on the charges Andrews thinks they are fair and reasonable. He says: "However, I would prefer to see all possible charges made against income rather than capital."
Yearsley says: ŕ per cent a year is on the high side for investment. The investment performance fee doesn't sound unreasonable as it is capped at 1 per cent maximum a year."
Examining the literature the panel agree that it is readable and much the same as any other investment trust literature. Both says: "It is clear and informative."
Summing up Both says: "A closed end fund, in a turbulent market such as this, is possibly a better structure than an Oeic or unit trust. Since it allows the manager the freedom to invest as they see fit and profit from opportunities which could be closed to a manager whose fund can shrink and grow with demand, forcing them to sell their stock at the worst time."