Following The Adviser Centre Monthly Review Meeting on 28^th October 2015, Montanaro UK Income was added to The Adviser Centre as a Positive Watch fund.

The fund is managed by Charles Montanaro, founder of Montanaro Asset Management.  Mr Montanaro has considerable experience in Pan-European smaller company markets and is supported by a sizeable and multi-national team of specialists.

Montanaro UK Income has a distinctive growth-orientated investment approach and a focus on mid and small-cap companies.  By nature, Mr Montanaro and his colleagues are growth investors but their embedded emphasis on cashflow analysis provides a strong foundation for this income mandate.  They believe that by combining growth stocks and yield stocks, using a process that emphasises proprietary research into smaller-cap companies, they have the opportunity to generate strong returns over a multi-year period.  Importantly in this typically higher risk investment arena, the process is designed to identify “quality” companies, defined by factors such as management credibility and cash returns on investment.  There is a particular focus on liquidity, as the team is highly cognisant of the challenges inherent in this part of the market.

The fund’s structural bias towards mid and small-cap companies and overt growth style differentiates it from the majority of funds in the IA UK Equity Income sector and its performance and risk characteristics are likely to differ accordingly.

This fund used to be invested according to a Pan-European equity income mandate but in January 2014, it became a UK-focused mandate and is now located in the IA UK Equity Income sector.  We believe that a Positive Watch endorsement is appropriate at the present time, given this change.  Nevertheless, we have a constructive view on the proposition, given Mr Montanaro’s long experience of, and dedication to, smaller company investing.

Within The Adviser Centre, we feature the fund in our “Structural Mid/Small-Cap Biased” category in our IA Sector Overview for the UK Equity Income sector.  For this sector, we classify our featured funds according investment approach and mandate type, as follows:

• Income and Growth
• Total Return
• Structural Mid/Small-Cap Biased

Please see our IA Sector Overview for the UK Equity Income sector for further details.  These documents are helpful in providing sector perspectives and in assisting with the blending of funds for portfolios. 

*Please note that the fund changed its name to Montanaro UK Income from Montanaro Equity Income in November 2015.