Downing targets 15% p.a. with first investment trust

Added 20th March 2017

Downing is to launch its first investment trust, Downing Strategic Micro-Cap Investment Trust, with an aim of 15% per annum returns though investing in between 12 and 18 equity holdings.

Downing targets 15% p.a. with first investment trust

To be managed by Judith MacKenzie, who runs the firm’s flagship UK Micro-Cap Growth Fund, the trust is aimed at delivering “returns associated with private equity investing coupled with the transparency of investing in listed companies”.

The trust will hold between 3% and 25% in the equity of any one company where MacKenzie and her team - fund managers Alyx Wood and James Lynch, and investment manager Nicholas Hawthorn - believe that the business is significantly undervalued.

Over an investment horizon of three to seven years, the mangers aim to unlock shareholder value through proactive engagement with management teams.

Various ‘strategic’ mechanisms Downing has used in the past include: restructuring boards, aligning incentive packages, recapitalising, and funding acquisitions for growth and/or synergies.

 “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,” MacKenzie said.

“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.”

The trust has an issue price of 100p per share, and initial NAV of 98p per share. The annual management fee is 1% of net assets.

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Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.

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