Like her colleague Rob Gleeson, Thierree has gone for a fund in IMA UK Equity Income, but her choice has returned significantly more this year; indeed, Unicorn UK Income is number one in its sector, with returns of more than 30 per cent.
Thierree highlights its stellar returns in 2012, as well as the fact it also tops the sector over three and five years. However, it is the fund’s role as a diversification tool that she finds particularly appealing.
"While its performance is outstanding, I have chosen it for its innovative approach to income, using a portfolio without FTSE 100 companies, which sets it apart from the rest of the UK Equity Income sector in which most funds look decidedly similar," she explained.
"This is partly due to McClure’s background in small caps – it makes sense he would stick to what he knows. In terms of the level of income it produces, it is certainly not the best-performing fund in the sector, but its overall performance is strong and it has an underestimated strength: income diversification."
Performance of fund vs sector and index over 1-yr
Source: FE Analytics
Unicorn UK Income is currently yielding 3.65 per cent, which is a little below average for the sector.
"Currently most of the UK Equity Income funds are invested in the same old companies and the top-10 holdings represent a massive portion of the portfolios," continued Thierree.
"Relying so much on so few stocks is dangerous and this has been a problem stressed by some fund managers recently."
"The fact that this fund is small is another plus; liquidity is not really an issue, and so it can move in and out of small companies quite easily."
According to FE data, 58 of the 100 funds in the UK Equity Income sector hold both Vodafone and GlaxoSmithKline in their top-10.
Such names are absentees in McClure’s top-10, which boasts the likes of Cineworld Group, commercial flooring manufacturer James Halstead, and plant hire company VP.
Unicorn UK Income currently has £76m assets under management (AUM), which is a marked increase from the figure of £34m this time last year. However, it remains relatively small, particularly considering there are funds in the sector with more than £12bn AUM.
Thierree also says the openness and availability of Unicorn is a big draw.
Performance of fund vs sector and index over 5-yrs
Source: FE Analytics
In spite of the fund’s small cap focus and overweight in cyclical sectors such as industrials, McClure (pictured) has been able to protect against the downside very effectively.
His fund lost only 2 percentage points more than its
All Share benchmark in 2008, only 1 percentage point more in 2011, and last year weathered the second quarter sell-off very effectively. "Over the last year specifically I have been impressed by its capacity to rebound," said Thierree. "When the fund has gone through inevitable periods of underperformance, it has been able to limit the impact of these losses, and when it recovers it goes well beyond expectations."
"It is even looking good when compared with the UK Smaller Companies sector, which is primarily dominated by growth-oriented funds, which have been better positioned to catch the market rally."
"Following a difficult 2011, there were some opportunities to grab in 2012, whether in terms of buying or selling and I think the manager assessed them correctly."
Unicorn UK Income requires a minimum investment of £2,500 and has a total expense ratio (TER) of 1.59 per cent.