Majedie Asset Management’s UK Income fund could lose its “unduly restrictive” stock limit under proposals made by the company in a move to guard against liquidity risk.
The investment policy for the Dublin-domiciled fund, run by Chris Reid, currently states that it is “likely to have a relatively concentrated portfolio of approximately 40 to 60 holdings at any given time”, but the company intends to remove this phrasing.
A circular to shareholders said: “It is proposed to remove this sentence as it has become unduly restrictive.
“The fund forms part of Majedie Asset Management’s UK Income strategy, which as a whole has assets under management of over £1.3bn.
“As the strategy has grown in size, it is considered that the flexibility to have more holdings is needed. Unlike many UK income funds which invest predominantly in the largest UK companies, the fund has a number of holdings in medium-sized UK companies.”
The board added that the flexibility to have more holdings was needed to “ensure that the illiquidity risk of the strategy does not increase beyond where it has been historically”.
It added: “Illiquidity risk arises from owning a larger percentage of the share capital of particular companies, which can make it more difficult to sell the holding at a good price. Otherwise the fund might be forced to invest more in large-cap stocks.”
Shareholders will be able to vote on the proposals at an extraordinary general meeting on October 23.
