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Octopus fund latest in discount trend

Octopus fund latest in discount trend

The manager of the new Octopus UK Multi Cap Income Fund, Chris McVey, will look to blend companies from across the market-cap spectrum to achieve capital growth and an attractive target dividend yield of 4 per cent a year.

Octopus is known for small-cap investing and this fund, although multi-cap, will have a natural bias towards smaller and medium-sized companies. 

Mr McVey has about 20 years' experience researching and investing in UK small and mid-caps, having worked for Citigroup and Gartmore before joining Octopus in 2016. Since then he has been deputy manager of the FP Octopus UK Micro Cap Growth Fund, which is among the top performers in its sector.

He will use the same investment process on this new fund. 

There is a launch offer period, which opened on November 26 and will end at 12pm on December 7 2018. During this time, the initial offer price of shares will be fixed at 100p.

The fund will actually launch on December 10 this year.

There is also an early-adopter share class that has a discounted annual management charge of 0.3 per cent (ongoing charges figure of 0.45 per cent) for those investing within the first year, and before the fund's assets under management reach £50m. The AMC will rise to 0.75 per cent for subsequent assets.

I am a fan of this nascent trend: asset managers lowering the charges for those who are willing to invest with them in the early days. 

I am also a fan of multi-cap income funds and they have become more popular as investors have recognised the value of a growing dividend stream, which can be more prevalent with small and medium-sized businesses.

Over the long term, the smaller end of the cap spectrum also tends to outperform in capital growth terms, so when you combine these companies with more established larger businesses that can boost the overall dividend yield level, it is a nice outcome for investors.

However, at this stage in the market cycle, and with Brexit uncertainties continuing, I am, for once, favouring equity income funds with more of a large-cap bias.

While the manager of this new fund has extensive experience and a good track record investing in small and mid-caps, he is untested in the larger end of the market. So I would rather allocate my money to other funds at this time and just watch this one for the time being. 

Darius McDermott is managing director of FundCalibre

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