Do not write off small cap investing: Unicorn

Do not write off small cap investing: Unicorn

There is a strong case for investing in small-caps for income despite many of them being sold off in 2014, Paul Harwood, chairman of the Unicorn investment committee has claimed.

In Unicorn Asset Management’s 2015 outlook, Mr Harwood said that despite a difficult 2014, smaller companies remained attractive because they could react quickly to changing economic conditions and had historically delivered long-term outperformance.

It claimed a focus on small and mid-cap companies could provide a differentiated income stream.

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It said: “Despite a tough year in 2014 where smaller companies were indiscriminately sold off as investors sought the perceived safety of larger companies, the long-term case for small caps remains compelling.”

The £577m Unicorn UK Income Fund, managed by Fraser Mackersie and Simon Moon, is benchmarked against the FTSE All Share, which had a dividend yield of 4.39 per cent for 2014. The fund sits in the UK Equity Income IMA sector, which has an average historic yield of 4.01 per cent. By comparison, the UK Income Fund had a 4.93 per cent yield last year.

The outlook added that smaller companies were often under-researched, with a lack of market forecasts providing “opportunity” for investors.

Adviser view

Jonothan McColgan, director of Somerset-based Combined Financial Strategies, said: “Smaller companies tend to have shorter track records of providing income and different priorities – mainly to grow.”