Edison issues review on Acorn Income Fund (AIF)

RNS Number : 1262X

Acorn Income Fund Ld

25 April 2019

 

London, UK, 25 April 2019

Edison issues review on Acorn Income Fund (AIF)

Acorn Income Fund (AIF) is one of the best-performing funds in the AIC universe over the past 10 years. However, it suffered a period of poor performance in 2018, as its high level of structural gearing compounded the ill effects of a sell-off in UK small-cap equities, in which c 75% of its portfolio is invested. The managers of the small-cap portfolio, Simon Moon and Fraser Mackersie at Unicorn Asset Management, remain very positive on the outlook, citing highly attractive valuations for the kinds of profitable, cash-generative, dividend-paying companies they seek. Meanwhile, the managers of AIF's income portfolio (Paul Smith and team at Premier Fund Managers) are focused on generating absolute returns from a diversified selection of short-dated bonds, investment companies and structured notes.

AIF's shares have traded on average at a c 6-7% discount to cum-income NAV over the past one, three and five years, although within this time frame there have been occasions when the shares have traded at a premium. At 24 April 2019, AIF's ordinary shares traded at a 12.6% discount, suggesting there is scope for a re rating if sentiment towards UK smaller companies improves. In the meantime, the shares offer an attractive dividend yield of 5.3%, backed up by a portfolio yield of c 5%. The high level of structural gearing has weighed on performance in recent months, but has the potential to boost returns if UK small-cap equities rally.

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