Royal London Asset Management (RLAM) has launched a fund investing in British smaller companies. The Royal London UK Smaller Companies Trust, launched on July 20, invests primarily in companies outside the FTSE 350.
The unit trust is managed by Victoria Stewart, who was appointed lead small cap fund manager across the company’s range of British equity products in January 2006.
Stewart looks for smaller British companies that have gone unnoticed by the market and that have the long-term potential to grow significantly ahead of the wider economy.
“I will run this fund very similarly to the money I have run for institutional clients,” says Stewart. “[The core portfolio], 75-80%, will be concentrated on long-term holdings. The other 15-20% will be available for shorter-term trading ideas, special situations and slightly more speculative ideas.”
The holding period for the core portfolio will start at 12 months, says Stewart. “I like to buy simple businesses, companies with strong positions in growing markets, particularly [with] management that has a track record of running businesses profitably. I also like companies that have a strong position in their area and can become much bigger companies.”
The shorter-term ideas have a typical holding period of three to six months. They include businesses that look good value at that time.
Stewart says that an important aspect of the fund is that it avoids overplaying themes. “We get diversification by making sure each investment brings something new to the portfolio and by not running excessive themes. For example, not having five mining stocks,” she says. “Each investment must stand on it’s own.”
The typical number of holdings in the portfolio is 40 to 50, and the preferred market cap range is between £50m and £500m. Alternative Investment Market (AIM) stocks will also be included.
The trust is part of the IMA UK Smaller Companies sector. It is benchmarked against the FTSE Small Cap (ex Investment Trusts) Index. The minimum investment is £1,000. Annual management and initial charges are 1.4% and 4%, respectively.