FE Alpha Manager John McClure
), who specialises in the UK small and mid cap equity market, has consistently outperformed his peer group composite over a long track record.
According to FE Analytics
, McClure has returned 286.69 per cent since November 2002, while his peer group composite has returned 174.21 per cent.
McClure is best known for running the £57.3m Unicorn UK Income
, which is the best performing portfolio in the competitive UK Equity Income sector over a one, three and five year period. It’s returned 49.23 per cent since October 2007, compared to 5.83 per cent from the average UK Equity Income portfolio, and 2.87 per cent from its sector average.
However McClure also runs three lesser-known funds and an investment trust, some of which are even more dominant in their respective fields.
His closed-ended fund, the Acorn Income IT
, is in a similar mould to Unicorn UK Income, in that it targets growth and income by investing predominantly in small to mid cap companies. It does have some fixed interest exposure though, with a 17 per cent weighting in the portfolio. This portion of the trust is overseen by bond specialist and co-manager Paul Smith.
The Acorn Income trust has been even more dominant than Unicorn UK Income over one, three and five, as well as over one, three and six months.
Performance of fund, trust, index and sector
Source: FE Analytics
In the last decade, it’s delivered 357.93 per cent – more than any fund in the UK Equity Income, IT UK High Income and IT UK Growth & Income sectors.
In a recent article, FE Trustnet highlighted the dominance of top-rated trusts over their open-ended rivals
McClure says there is a significant degree of overlap between the Acorn Income IT and Unicorn UK Income – they both hold VP, Castings and James Halstead in their top-10, and have significant overweights in the support services sector, for example. He says that the main reason for the trust’s significant outperformance over the fund is down to its gearing.
McClure said: “The trust has gearing in it; in fact it is permanently geared, and so it is seen as a high beta investment.”
“The rulings on dividends are also different. The open-ended fund has to distribute everything it has in it, while I can hold back dividends in the Acorn trust and smooth the yield out.”
Acorn UK Income currently has a yield of 4.93 per cent, while Unicorn UK Income is yielding 3.79 per cent. The trust has an annual management charge (AMC) of 0.7 per cent, which doesn’t include its performance fee.
McClure also co-manages the five-crown rated Unicorn Outstanding British Companies
portfolio. The £10m fund has returned 72.91 per cent since its launch in December 2006 – a figure beaten by only two funds in its IMA UK All Companies sector. It’s also been significantly less volatile than its peer group and FTSE All Share benchmark over the period, and is a top-quartile performer over a three and five year period as well.
Performance of fund versus sector and index over 5yrs
Source: FE Analytics
Unicorn Outstanding British Companies holds major UK blue chips like Rolls Royce, British American Tobacco and Johnson Matthey in its top-10, as well as smaller companies like Renishaw and Domino Printing Services.
McClure accepts a lot of the companies in the portfolio are quite boring companies, but says the fund’s record speaks for itself.
“In essence, most investors would see stocks that our Outstanding British Companies fund holds as dull,” he said. “However, year on year these companies have produced the goods and I don’t see any reason to change from them.”
“It doesn’t take a rocket scientist to make money over the long term if you invest in companies that are the best in their field. Some have made money by nipping in and out of racier areas like commodity stocks and mineral companies, but over the long term the majority have lost money doing that.”
The fund has a minimum investment of £2,500 and a TER of 1.74 per cent.
The smallest of McClure’s funds is the £7.5m Unicorn Free Spirit
portfolio, which he co-manages with Fraser Mackersie
The fund is also a top quartile performer in its IMA UK All Companies
sector over one, three, five and 10 years, and has a small to mid cap focus.
The portfolio has a significant overweight in technology at the moment – an area which McClure thinks is terrifically undervalued.
“After the dot come crash, we saw good tech growth related stocks that become unloved and very cheap,” he explained.
“Ten years on, those companies are making profits and many are paying good dividends.”
“If you include indirect exposure, we have 86 per cent in tech overall.”
McClure says he leaves the day-to-day running of the fund to his co-manager Mackersie, and expects inflows to pick up once he gets a few more years under his belt.
“Fraser [Mackersie] has a short track record and investors might see him as novice,” he said. “However, I think people will clock on to what we are doing and I think inflows will pick up over the coming years.”
“Our income fund was about £2m three years ago and now it’s close to £60m.”
Mackersie became co-manager of the portfolio in March 2011.
The Unicorn UK Smaller Companies
portfolio has the least consistent record of all those under McClure, which the manager was keen to acknowledge.
Though the growth-focused portfolio is a top quartile performer in its IMA UK Smaller Companies
sector over three years with returns of 65.45 per cent, and a second quartile performer over five, it’s underperformed in the longer term, thanks largely to a disastrous 2004 and 2005.
However, McClure says he has been happier with performance recently, and is now happy with where the portfolio is positioned. It’s more small-cap focused than all of McClure’s other funds, with a high degree of exposure to the FTSE AIM and FTSE Fledgling indices.
It has a TER of 1.54 per cent and a minimum investment of £2,500.