19 May 2021 07:00
London, UK, 19 May 2021
Edison issues flash note on Acorn Income Fund (AIF)
The board of Acorn Income Fund (AIF) has announced the results of its strategic review ahead of the company's five-yearly discontinuation vote in August. It is proposing to change the mandate from its present c 75% in UK smaller companies and c 25% in income-producing assets to a global equity income fund focused on sustainability and positive impact, managed by BMO Global Asset Management rather than the current partnership between Unicorn Asset Management and Premier Miton. AIF's approach of investing in well-financed, income-generating and often domestically oriented small caps had led to a period of underperformance, partly attributable to Brexit uncertainty but compounded by last year's COVID-19 induced dividend cuts. However, returns have rebounded strongly in the past year (see chart) as investors have begun to reassess the UK equity market. The board advises that shareholders who favour the move to BMO should vote against discontinuation and in favour of the proposals at the AGM and EGM in August. A circular will be published in due course.
■ The board considered the forthcoming discontinuation vote as offering a good catalyst for a reappraisal of the strategy.
■ While it has performed well over the long term (total returns of c 10% pa over 10 years), AIF remains a small fund and is trading at a c 14% discount to NAV.
■ The board sees the growing appetite for sustainable investment as offering an opportunity for the fund to attract new investors and grow its share base over time. BMO Global Asset Management (through predecessor company Friends Provident) pioneered sustainable investment for UK retail investors through its Stewardship funds.
■ The renamed BMO Global Sustainable Equity Income Fund proposes to offer a sustainable portfolio yield of c 3.5% pa (compared with AIF's currently uncovered 6.4% dividend yield) at a reduced annual management fee (65bps on net assets from 70bps on gross assets) and with no performance fee.
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