Unicorn AIM IHT ISA

The Unicorn AIM IHT ISA is a portfolio of AIM shares that combine the tax benefits of ISAs (tax-free income and growth) with the IHT protection some AIM shares enjoy. 

Highlights

  • The manager, Chris Hutchinson, is one of the best known and most experienced investors on AIM
  • Seeks the “blue chips” of AIM: profitable, dividend-paying companies
  • Income or growth portfolios available: any income will be paid tax-free, quarterly
  • Save up to 3.5% on the initial charge
  • Minimum investment £50,000 (£20,000 if topping up an existing portfolio)

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

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The manager

Unicorn Asset Management is a specialist in UK smaller companies. About a quarter of the £1.4 billion Unicorn manages is in AIM stocks. Unicorn’s AIM VCT is the UK’s largest. The Unicorn AIM IHT portfolios were launched in 2016 and are managed by Chris Hutchinson, who is also the lead manager for the Unicorn AIM VCT.

There are around 1,000 firms on AIM. As Chris Hutchinson puts it: ‘Among the dross there are some great businesses. But you have to filter through the ones that over-promise, under-deliver, burn through cash or are too specialist. Whittle them down to around 40 and you stand a good chance of getting some decent returns.'

The IHT portfolios often invests in businesses Unicorn has known for years and which were previously backed by the VCT.

Watch an exclusive video interview with manager Chris Hutchinson of Unicorn:


Recorded 7 November 2018

The offer

There is a choice of an Income or Growth Portfolio. The former will pay out any dividends received quarterly, whilst the latter will re-invest them. Please remember, dividends are variable and not guaranteed.

Each of the two portfolios currently includes 29 AIM-listed companies, spread across a variety of sectors and independently assessed as likely to qualify for BPR. A similar investment strategy applies to both. However, for the Income portfolio, a greater emphasis is placed on the level and sustainability of dividends.

Mr Hutchinson is looking for established, profitable, cash-generative businesses. Indeed, the average market cap is £476 million for the Growth Portfolio and £342 million for the Income Portfolio (June 2019). 

All the companies across the two portfolios were profitable at the time of investment. All but three pay dividends (as at June 2019).

Mr Hutchinson aims to avoid any companies with significant debt, which are burning through cash or relying on regular rounds of fundraising, and he steers clear of those he doesn’t understand. For instance, he avoids investing in oil, gas, mining and commodities along with biotech and early-stage tech companies. He prefers businesses where the founders – or the founding family – still have a significant stake.

Portfolio

The current portfolio breakdowns are shown below:

Source: Unicorn Asset Management - as at 30 June 2019

Income portfolio – some examples

James Halstead - supplier of flooring for Machu Picchu railwayJames Halstead plc is a major international group that manufactures contract and consumer flooring. Its products are used all over the world, including in high-profile projects such as on the world’s largest cruise ship, Royal Caribbean’s ”Freedom of the Seas”, and in every carriage of the highest train on the planet, the Machu Picchu Railway in Peru. 

The business has been in the same family for four generations, since 1915.  The company is worth just over £1 billion (31 July 2019). James Halstead is the largest holding in the Income Portfolio and third in the Growth Portfolio.

RWS Holdings - Unicorn AIM IHT ISARWS Holdings is one of the world's leading translation and IP services companies. In one year alone it translated over 500 million words, 80,000 patent and IP documents, and 65,000 life sciences projects.

The company is worth just under £1.8 billion (July 2019). RWS is the fourth largest holding in the Income Portfolio and the largest holding in the Growth Portfolio.

Growth portfolio – some examples

 Churchill China - Unicorn AIM IHTChurchill China is a leading manufacturer of high-quality ceramic crockery. The company can trace its origins back to 1795 and the foundation of its first factory in the heart of what later became the Staffordshire Potteries. 

Over the years the company has combined heritage and innovation. One of its original patterns, Blue Willow, is still in production after over 100 years. At the same time, Churchill has progressively developed, building a strong reputation as an innovative and reliable supplier of quality table-top products.

To date, Churchill products are used in hospitality establishments in over 70 countries worldwide, achieved through a 508 strong global distributor network. Portfolio company case studies Churchill China exhibits many of the qualities Unicorn looks for in an investment opportunity: a high-quality product offering, a strong track record of earnings growth and consistent delivery against market expectations, although please note past performance is not a guide to the future. In addition, Churchill China still is, in some respects, a family business. The Roper family has been at the helm since 1922 and still holds a significant share of the business.

The company is worth £165 million (July 2019).

James Cropper - Paper Bridge installation, China, being crossed by Range RoverJames Cropper is a specialist materials group and maker of fine paper with operational reach across more than 50 countries. It was established in 1845 and has been in the same family for six generations. Besides targeting organic growth, the company also invests in sustainable innovation. It created the world’s first coffee cup recycling plant, able to process 10 million cups per week.

The company is worth £99 million (July 2019).

Performance

Despite the portfolios being relatively young, Unicorn has a long track record of good performance on AIM, although remember past performance is not a guide to the future. Below are the performance figures of the portfolios to date.

Source: WM Capital Management for Unicorn, May 2016 - June 2019. Previous years not available: the portfolios started in January 2016 (Growth) and April 2016 (income). Total return on a sample of fully invested portfolios weighted by portfolio size, after fees apart from initial fees. Based on the bid price at each month end. Past performance is not a guide to the future.

Annual performance - by calendar year to 30 June 2019

  2016* 2017 2018 2019**
Unicorn AIM IHT Portfolio Service - Income Portfolio 6.9% 21.3% -15.0% 13.9%
Unicorn AIM IHT Portfolio Service - Growth Portfolio 14.3% 42.3% -24.3% 18.0%
Source: Unicorn Asset Management as at 30 June 2019. *The income portfolio launched in April 2016, the growth portfolio in January 2016. Full year data therefore not available. **Performance up to June 2019, these are not the final figures for the 2019 calendar year. Performance figures show the total return of the Unicorn AIM IHT & ISA Portfolio Service Growth and Income Portfolios where the contribution of each portfolio to the total return is weighted by portfolio size. The returns take into account portfolio management fees excluding initial fees. Individual portfolios are excluded during months when a portfolio is being invested or during months when withdrawals are made. Past performance is not a guide to future returns, the value of investments and the income derived from them may fluctuate and you may not receive back the amount invested.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.

AIM IHT portfolios are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

AIM stocks can be hard to sell, particularly at the smaller end of the market, and can be illiquid. AIM shares can be very volatile especially if the market falls sharply. The difference between the buying and selling price of AIM-listed shares is often wider than the spread for shares listed on the main market.

Tax rules can change and benefits depend on circumstances. Eligibility for BPR is assessed at the date of death and will depend on the companies in the portfolio remaining qualifying. Broadly speaking, you will need to have held a BPR-qualifying stock for at least two years and still hold it on death to qualify.

AIM shares tend to be riskier and more volatile than typical investments in an ISA portfolio, such as unit trusts or shares listed on the main market. AIM stocks are also more illiquid.

To benefit from IHT relief, you must hold the shares for at least two years and on death and the company must remain qualifying.

Treasury review

The Chancellor has asked the Office for Tax Simplification to review a range of aspects of IHT, including BPR. A report has been published in July 2019. It is as yet unknown when and if any of the recommendations will lead to a change in rules. Currently, investments qualifying for Business Property Relief should be free from IHT after two years. Please remember, tax rules can and do change and benefits depend on circumstances.

Fees and charges

An overall summary of the charges is shown below. 

Full initial charge 4.5% plus VAT
Wealth Club initial saving 3.5%
Net initial charge through Wealth Club 1% plus VAT
Annual management charge 2% plus VAT
Dealing fees 0.5%
Brokerage fees 0.35%
Performance fee nil
Exit fee (not payable on death) 1%
Minimum investment £50,000

See example of the total charges over 5 years

    Please see the provider's documents for more details on the total fees and charges. Note probate valuation fees may apply on death. If you would like a full breakdown of charges, or a personal illustration, please let us know.

    Our view

    Unicorn has always had a small company bias across its range of products and can rightly be called a specialist in this area. They are experienced in smaller company and AIM management and have a clear vision for what they want to achieve. Identifying long term winners and sticking with them over many years is the key. Of particular interest are the “blue chip” AIM stocks and those with large family shareholdings. This service is managed by a dedicated and talented fund management team.  The minimum investment for the Unicorn AIM IHT & ISA Portfolio Service is £50,000.

    Read important documents and apply

    Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.

    The details

    Portfolio size
    £23.0 million
    Average market cap
    £409.0 million
    Initial charge
    4.5%
    Saving via Wealth Club
    3.5%
    Net initial charge
    1.0%
    AMC
    2.0%
    Last updated: 31 July 2019