Three reasons to add a UK multi cap income fund
If you’re looking for income, especially if you want that income to grow over time, you might want to consider a UK multi cap fund.
Why?
Well, by favouring small and mid-sized companies, it’s possible to target predictable income without excluding the growth benefits smaller companies add to your portfolio.
Here are our top three reasons to add a multi cap income fund to your portfolio.
Reason 1 – Smaller companies can grow their earnings and dividends faster
Small and mid-sized companies tend to have faster growth in earnings. That means the share prices have a better chance of increasing at a faster rate. They tend to grow their dividends faster too.
One reason is they can use new technology and innovative business models to service more customers at a lower cost.
Smaller companies, by virtue of their size, can often make decisions more quickly than larger ones.
That helps them take advantage of opportunities, like exploiting the weaknesses in a legacy industry during a downturn.
Reason 2 – a more diversified approach
Different sized companies and different sectors will perform and react to events in their own way. So it pays to have investments in large and small companies.
While larger stocks are priced efficiently, smaller companies can be under-researched and under-valued. This is where active fund management can really work for you.
It makes sense to balance investments in smaller companies that have faster growth potential with larger companies paying predictable dividends.
Fund managers who have the scope and expertise to find sources of growth and income across the whole market can consistently add value.
Reason 3 – less concentration risk
The typical UK equity income fund tends to favour a small number of very large, dividend-paying companies.
In fact, more than a quarter of all money held within funds in the IA UK equity income sector is in just ten dividend-paying companies.*
So no matter how many of these traditional UK equity income funds you hold, you’ll likely still end up with a lot of exposure to just a few large companies.
This is called concentration risk. It’s the proverbial many eggs in one basket.
A multi cap approach means that companies of all sizes are held within the portfolio. This is a more balanced approach, reducing your reliance on that handful of traditional large companies.
Introducing the FP Octopus UK Multi Cap Income Fund
- Targeted yield of above 4% although yield is not guaranteed
- Targeted long-term capital growth potential
- Not constrained by company market capitalisation or sector
- Specialist investment team
The FP Octopus UK Multi Cap Income Fund is managed by the Quoted Smaller Companies team at Octopus Investments. Led by Richard Power, who has more than 20 years’ experience in smaller company investing, the team manages more than £1.6bn across several products.
This includes the FP Octopus UK Micro Cap Growth Fund, a sister fund to the FP Octopus UK Multi Cap Income Fund. It has a proven track record in finding fast growing smaller businesses with outstanding growth prospects.
You can see the strong performance of the FP Octopus UK Micro Cap Growth Fund below. But please be aware that past performance is not a guarantee of future returns.
Risks to bear in mind
The value of any investment can fall or rise, and you may not get back the full amount you invest. Smaller company shares are also likely to fall and rise in value more than shares in larger, more established companies listed on the main market of the London Stock Exchange. They may also be harder to sell. For the FP Octopus UK Multi Cap Income Fund, fees will be deducted from capital which will increase the amount of income available for distribution. However, this will erode capital and may hinder capital growth.
| Q4 2017 - Q4 2018 | Q4 2016 - Q4 2017 | Q4 2015 - Q4 2016 | Q4 2014 - 2015 | Q4 2013 - Q4 2014 | |
| FP Octopus UK Micro Cap Growth P Acc | -2.9% | 34.9% | 10.6% | 5.2% | -4.2% |
| IA UK Smaller Companies sector | -11.8% | 26.7% | 8.6% | 14.8% | -1.8% |
Source: Lipper. Returns are based on published dealing prices, single price mid to mid with net income reinvested, net of fees, in sterling.
*Moneywise ‘Seven out of 10 UK equity income funds hold these 10 companies’ 21 April 2017
Our investments are not suitable for everyone. We do not offer investment or tax advice. Personal opinions may change and should not be seen as advice or a recommendation.
Before investing you should read the Prospectus, the Key Investor Information Document (KIID) and the Supplementary Information Document (SID) as they contain important information regarding the fund, including charges, tax and fund specific risk warnings and will form the basis of any investment. The Prospectus, KIID and application forms are available in English at octopusinvestments.com. The Authorised Corporate Director (ACD) of these funds is FundRock Partners Ltd which is authorised and regulated by the Financial Conduct Authority no. 469278, Registered Office: 8/9 Lovat Lane, London EC3R 8DW.
Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. CAM007988.