The £14.1m closed-ended trust, which comprises of a smaller companies portfolio and an income portfolio, has a 34.8 per cent exposure to banks in the latter. Our data shows Acorn Income’s overall exposure to financials was 14.8 per cent at the end of September. FE Alpha Manager John McClure co-manages alongside Smith.
"There are good opportunities in financials. We’ve got a Lloyds convertible in our top-10 and the risk of it turning into equity has greatly diminished as levels of capital have gone down since the bond was bought," Premier’s investment director Nigel Sidebottom explained.
The fund has little exposure to European banks.
On the small cap side, McClure has taken a very low exposure to the UK, preferring companies with an overseas range.
"Our top-five holdings have more than 50 per cent exposure overseas. We’ve bought out of many very small companies. Only 12.5 per cent is in companies which have a market cap of less than £75m," McClure said.
The comments came as Acorn Income announced it intends to issue £12m to £13.5m of zero-dividend preference shares. The redeemable preference shares will have a gross redemption yield (GRY) of 5.75 to 6.5 per cent.
The issue will replace a £6m loan facility from RBS that runs out next year and that the bank did not renew.
"The implications for current investors mean there is more to distribute to ordinary shareholders," Sidebottom explained.
"We hope a higher yield will mean a better rating on the stockmarket. Our peers who have run a similar split structure have seen their discount tighten in to trade at asset value. This will give the option to issue more shares in the future."
Performance of trust vs sector over 3-yrs
Source: FE Analytics
Our data shows Acorn Income as one of the top performers in its IT UK High Income sector. It has returned 148.2 per cent over three years, while its average peer has returned 76.5 per cent.