Downing announces launch of Micro-Cap Investment Trust

Alexander Bueso Sharecast | 20 Mar, 2017 10:44 - Updated: 16:18 | | |

calculatrice-et-trombones-comptes-entrepreneurs-entreprises-argent-finances-tpe-pme-entreprenariat-finances-banques-startup-business-plan-argent

Downing announced plans to launch a new investment trust focused on the UK micro-cap space, which some analysts hailed as a potentially useful addition to the sector.

The investment manager aims to raise up to £100 for its Downing Strategic Micro-Cap Investment Trust via a placing, offer for subscription and intermediaries offer.

Funds raised would be funelled into equity stakes of between 3.0% and 25.0% spread across between 12 to 18 holdings, Downing said.

Management said it would take a private-equity approach with its investments, focusing on the future value of companies' free cash flows, the sustainability of margins and the strength of management teams.

It also sought to take advantage of what it saw as under-served segment of the market, whose inefficiencies included a lack of analyst coverage and intermittent share trading.

Targetting an annual compound rate of return of 15% over the long-term, Downing said it would also adopt a proactive approach when engaging with managements, seeking entry points at a discount to intrinsic value to help mitigate some of the inefficiencies presented by the micro-cap market.

Commenting on the new trust, Downing fund manager, Judith MacKenzie, said: "We believe that there are attractive investment opportunities within the micro-cap space for the experienced and diligent investment manager, looking to invest for the longer term, who can devote the necessary time to understanding a business and its market. By applying a private equity approach to public equity investing, we aim to identify such opportunities within this space."

A prospectus was to be published in late March with admission to trading on the main market scheduled for 9 May 2017.

Favourable take from QuotedData

QuotedData head of research James Carthew said: "The new Downing fund would be the third trust focused on microcaps, joining Miton UK Microcap and River & Mercantile UK Micro Cap. The Downing fund would have by far the most concentrated portfolio – the River & Mercantile fund has around 30 holdings while the Miton fund had 128 at the end of January.

"River & Mercantile UK Micro Cap has been one of the best performing UK smaller companies funds over the past year, shrugging off the problems of Brexit, while the Miton fund lagged both the UK small cap peer group and small cap indices over the year to the end of January 2017.

"It is interesting to see a manager crossing over from managing VCTs to managing an investment trust. If the fund makes its £100m target, it could be a useful addition to the sector."

More news

19:01 Commodities: Increasing supply of oil weighs heavy on the market

An over supply of crude from Nigeria and Libya of approximately 1m barrels per day weighed heavily on the oil market on Friday with September contracts for both WTI crude and Brent crude down 2.28% and 2.29% respectively.

18:58 Magnolia Petroleum announces divestment of North Dakota and Oklahoma wells

Magnolia Petroleum, an Oklahoma based oil and gas investment company, has divested and agreed farmouts over several wells in North Dakota and Oklahoma for a total of $411,000.

18:55 Europe close: DAX dives on euro peaks and colluding carmakers

European stocks ended the week firmly in the red as the euro continued to march higher, with the strength in the single currency weighing on exporters and car makers were hit by reports of collusion in the industry, combining to send the Dax to new three-month lows.

18:34 FX round-up: Lack of data release makes way for indecisive Cable moves

On Friday sterling managed to recover most of its losses against the US dollar from prior session posting a morning high of 1.3020, only managing to touch psychological resistance of 1.3000 briefly.

17:29 London close: FTSE profit taking kicks shares into red

UK stocks were lacklustre on Friday as oil and stocks plunged but investors mulled yet more waxing and waning of Brexit negotiations, proving that uncertainty is the only certainty surrounding the issue.

17:07 FTSE 100 movers: Paddy Power leads Friday retreat

London's FTSE 100 was in the red on Friday, along with stock benchmarks in Europe and the US.

16:36 General Electric tumbles further as profits slide

US industrial giant General Electric reported net profits of $1.34bn for the second quarter of 2017, 53% less than its earnings for the same quarter in 2016.

16:25 US open: Wall Street slips amid weak tech earnings, downbeat GE

Wall Street was slightly lower in early trading following disappointing updates from Microsoft and Ebay, alongside weak guidance from industrial conglomerate GE.

16:03 Catalyst Media softens blow from failed Greyhound track bids

Retail betting service supplier Sports Information Services (SIS), in which Catalyst Media Group holds a 20.5% stake, has secured rights and media agreements for its greyhound and horseracing content.

16:00 Dalata buys Hotel La Tour for £31m

AIM-listed Dalata has acquired Hotel La Tour for £31m from Hotel La Tour Limited, which owns the long leasehold interest in the hotel situated on Park Street in the centre of Birmingham.