The new fund will be co-managed by David Taylor, the co-manager of the Chelverton UK Equity Income Fund, and James Baker, who joined the group in June.
Baker, who will be lead manager on the fund, has 30 years of equity market experience, much of it on the sell side, 11 of those years were spent as part of ABN Amro’s Small and Mid-Cap sales team.
Prior to moving to Chelverton, Baker served as assistant fund manager on the Rathbone UK Recovery Fund for the 15 months to the end of 2013.
Asked why the group had decided to launch a small and mid-cap growth fund now, Baker told Portfolio Adviser that valuations in the space remain good and are not far off those of large-caps and, with good GDP growth in the UK expected to continue, the prospects remain promising.
“Sometimes it is better to launch something when people aren’t necessarily chasing the sector,” Baker said.
According to Chelverton the fund will seek to deliver long-term capital growth by investing in companies with market caps from £25m up to, but excluding the FTSE 100.
From that universe of roughly 1000 stocks, the fund will use a quantitative screen that looks for strong cash flows, good revenue growth, low gearing high gross margins and low working capital intensity to reduce the universe to a more manageable 200 stocks. After which the managers will look for predictability of sales, sustainability of margins and shareholder-friendly management.
According to Baker, a minimum of 80% of the fund will be invested through that process, but will be able to make tactical allocations with the remaining 20% of the fund to sectors and stocks that for various reasons do not pass the quantitative screen. And, it will be able to invest up to 5% of the fund in “concept stocks” that are being brought to market.
Fund facts:
– Launch price: 100p
– IMA sector: UK All Companies
– Fund structure: OEIC
– Number of holdings: 50-60
– Income paid: annually
– Ex-dividend date: 31 December
– Dividend pay date: February
– Minimum investment: £1,000
– Annual management fee: 0.75% on both Income and Accumulation units
