Bath/Head Office & Unquoted Equity Team:
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Edinburgh Office & European Quoted Equity Team:
MI Chelverton UK Equity Income Fund

MI Chelverton UK Equity Income Fund

Our Approach

We specialise in the mid and small-cap income areas of the UK market because we believe that these parts of the market are overlooked by both brokers and fellow small and mid-cap managers.  Fund managers tend to seek growth above income and brokers have little financial incentive to provide research into the ‘dull but worthy’ companies that we like. Our performance record proves that the application of a rigorous investment discipline, combined with patience and a long term outlook, can produce outstanding returns for investors.  This fund is designed to deliver a high initial yield and we look for investments that are capable of increasing those returns over future years. Since we are investing for income, the key is to find companies that generate cash on a sensible and sustainable basis, which is then used to grow the business and to reward shareholders.  We look for management teams to strike an appropriate balance between current and future income.

Our Investment Process

We will only invest in a company for the first time if it yields at least 4% on a twelve month view.  This is a cast iron rule to which there are no exceptions.  We screen all small and mid-caps above £50m market cap on a regular basis to identify these companies. It is important to note that just because a company has a high yield does not necessarily mean it may be worth investing in. We are careful to avoid these value traps through rigorous due diligence. Balance sheets are tested to ensure that there is not too much debt and that the working capital requirements are not too onerous.  Sales growth and margins are examined, leading to a measure of likely dividend growth.  It is important to us to build a portfolio that will grow its underlying dividend from one year to the next.  Beyond that, we keep in close touch with the management teams of the companies in which we invest; we are looking for sensible, pragmatic people, who understand the importance of dividends and dividend growth to investors. Providing that a company can meet these requirements, we invest at a yield of at least 4% and we can add to it until the yield falls to 3%, following share price appreciation.   If it gets to 2% we will usually look to sell but often we will have divested before that point, replenishing the portfolio with another high yielder.

To find out more about this fund, please do not hesitate to contact our Quoted Equity Team.

Or, alternatively, please contact our dealing line: