This is a specialised fund within the Equity Income Sector with a focus on small cap stocks that offer a prospective yield at purchase that is 50% greater than the FTSE Mid and Small cap average yield. The manager has established a a good track record within the small cap universe and whilst the fund offers an attractive income yield, investors should consider the extra risks associated with investing in small cap companies.
The fund has 3 investment objectives; in order of priority these are: preservation of capital, increasing dividend payments by the rate of inflation, and an increase in capital values.
To achieve this the manager will invest in companies that can demonstrate strong balance sheets (less than 30% gearing) and cashflows, with the prospect of growing earnings supported by dividend payments. These companies should also carry a low enterprise value / ebitda rating. Target companies can broadly be split into those that offer high but stable dividend yields and those are lower yielding but offer the prospect of dividend growth. Often this may involve the manager adopting a contrarian approach to investing.
The fund is diversified across a broad selection of industries and tends to be focused on smaller companies with market capitalisations of less than £100m at investment.