CF Chelverton UK Equity Income Fund (CEIF)

An Open Ended Investment Company ("OEIC") combining the disciplines of equity income investing with the pricing inefficiencies of UK smaller companies.

 

CEIF Fact Sheet

 

CEIF - Retail Income share - KIID

 

CEIF - Retail Accumulation share - KIID

 

CEIF - Institutional Income share - KIID

 

CEIF - Institutional Accumulation share - KIID

 

 

The Chelverton UK Equity Income Fund seeks to provide investors with a relatively high and growing income from investment in UK small and mid cap equities.

 

We believe that the key driver of a share price over the long term is the ability of the business to pay a dividend as a tangible measure of the underlying cash flow.  Companies will choose differing uses for their cash over their lifetime, usually a combination of internal investment, acquisitions and a return to shareholders, but as earnings growth will ultimately revert to the mean it is only a question of timing as to when the dividend payment becomes the main determinant of value. To this end our investment process is focussed on delivering a relatively high level of income that can grow in real terms over the long term.

 

We define the investible universe for the Chelverton UK Equity Income Fund as UK small and mid cap equities with a minimum yield of 50% more than the average for UK small and mid caps on a twelve month view. Opportunities exist as these stocks tend not to be bought by small cap ‘growth’ managers and are too small for the vast majority of other income fund managers.  We identify three differing types of opportunity.  Firstly, high and stable yield, where we expect no dividend growth over the short term but where there is a propensity to increase when appropriate.  Secondly, high yield recovery where a stock has fallen dramatically, usually the result of a short term earnings setback, to a level where the cash flow prospects are not reflected in the price.  Finally, steadily growing dividend, which is the core of our portfolio where the ability to consistently increase dividend payments in real terms is not reflected in valuations. This last category represents our most compelling opportunity as Companies that can deliver this are ultimately re-rated by investors over the longer term.

 

Our philosophy is based upon applying the disciplines of equity income investing to the pricing inefficiencies inherent within the small and mid cap sectors.  These inefficiencies exist because of the relative lack of independent research and are, we believe , particularly relevant within our universe which forms neither the core of mainstream income nor small/mid cap portfolios.  Every stock has both an ability and propensity to pay a dividend.  The ability can be determined by analysis of cash flows and balance sheets and the propensity by regular meetings with management. Our discipline at the portfolio level is to construct a portfolio with a relatively high initial yield that can grow its income in excess of inflation on an annual basis over the long term.  It is our belief that by delivering this we will generate excess returns for our shareholders.