Downing is launching its first investment trust to be run by Judith MacKenzie.
The Downing Strategic Micro-Cap Investment trust will target private equity-like returns but with transparency. Fund managers Alyx Wood and James Lynch and investment manager Nicholas Hawthorn will assist MacKenzie. The team will aim to mitigate risk through extensive due diligence and actively engaging with the management of the companies they invest in.
The trust will follow a similar strategy to MacKenzie’s Downing UK Micro-Cap Growth fund. It will have between 12 and 18 positions in undervalued turnaround businesses and will hold between 3 and 25 per cent in the equity of a company.
MacKenzie says: “Our investment process should enable the trust to mitigate much of the perceived risk in quoted smaller companies while the closed-ended structure ensures that the interests and investment horizons of both investors and the fund manager are closely aligned.
“Companies with a market cap of under £150m – and particularly those under £50m – lack analyst coverage and institutional attention which drives pricing inefficiency and, therefore, attractive valuations. There is a wider universe of micro-cap companies, therefore, we believe, there is a wider opportunity compared to those companies with larger market capitalisations, as micro-cap companies tend to better value.”