Unicorn AIM IHT ISA

The Unicorn AIM IHT Portfolio Service is run by specialist UK smaller company investor Unicorn Asset Management (‘Unicorn’), which began investing in AIM in 2000. Unicorn currently manages £885 million across its range of predominantly UK equity focused investment mandates; of this, £40.1 million is within the AIM IHT Portfolio Service (June 2023).

The investment team is headed up by Chris Hutchinson, who has more than 20 years’ experience managing portfolios of UK smaller companies. He is the lead manager of the Unicorn AIM VCT (the UK’s largest AIM VCT) as well as the Unicorn Outstanding British Companies Fund and has primary responsibility for selecting stocks for the service.

• Portfolio of 25-40 AIM stocks
• Dividend or growth focus, plus responsible investment options available
• Minimum investment £20,000 (exclusive to Wealth Club clients) – you can apply online 
• Apply in an ISA: top up or make a new subscription online using the link below. To transfer existing ISAs, please download, print and complete the ISA transfer form and post it to us
• Apply outside an ISA: please contact us for details

The manager

Unicorn, the Investment Adviser to the service, is a specialist AIM, small and mid-cap manager. It manages more than £885 million (June 2023) across its five UK equity funds, Unicorn Mastertrust, the Unicorn AIM VCT, and Unicorn AIM IHT Portfolio Service. Overall, it manages £280 million in AIM stocks. 

Unicorn has been investing in AIM since the company’s inception in 2000. It has its own dedicated in-house research team which seeks to uncover attractive opportunities that may not yet be known to other investment groups. 

There are nine members in the investment team, with Chris Hutchinson acting as senior fund manager. Mr Hutchinson joined Unicorn in 2005 and has more than 20 years’ experience managing portfolios of UK smaller companies. He is the lead manager of the Unicorn AIM VCT (the UK’s largest AIM VCT) as well as the Unicorn Outstanding British Companies Fund and will have primary responsibility for selecting stocks for the service. 

WM Capital Management Limited (WM) is the portfolio Discretionary Investment Manager, responsible for the day-to-day management of investor portfolios, including the allocation of stocks, compliance and taking legal advice on a stock's BPR-qualifying status. James Brearley & Sons Limited (James Brearley) is the Administrator and Custodian, holding shares on investors’ behalf. 

Investment strategy

There are close to 800 firms on AIM and, as Chris Hutchinson has put it, ‘Among the dross there are some great businesses.'

The service sticks to what Mr Hutchinson considers to be the fundamentals of stock picking. It seeks established, profitable, and cash-generative businesses with minimal gearing, offering products or services with tangible benefits for their consumers. 

The team favours companies whose founders or management team have retained a meaningful stake in the business. In Unicorn’s experience, these tend to be more risk-averse and focused on long-term growth, traits that complement the service. 

Investors have the choice of Dividend Focus or Growth Focus. Both follow a similar investment strategy but whilst the growth portfolio places greater emphasis on companies that Unicorn believes can deliver sustainable earnings growth, the dividend portfolio focuses on companies paying attractive and potentially growing dividends (dividends are variable and not guaranteed).

Responsible Investment Portfolio Service options 

As a signatory of the United Nations Principles of Responsible Investment, Unicorn has a company-wide Responsible Investment Policy, which commits its investment team to consider Environmental, Social, and Governance (ESG) issues when selecting stocks for all its investment mandates.

The Dividend Focus and Growth Focus portfolios will be managed in line with Unicorn’s Responsible Investment Policy.

In addition, each portfolio has a specific responsible investment subset available (Responsible Growth Focus Portfolio and Responsible Dividend Focus Portfolio) for investors who wish to adopt stricter sector limits and exclusions:

• No companies that generate any revenues from any of the following sectors: adult entertainment, animal welfare, genetic engineering, gambling, and tobacco manufacture
• No companies that generate 5% or more of their revenues from alcohol, defence & weapons and nuclear power
• No companies the investment team considers to be involved in significant ESG controversies
  

The Responsible Portfolios will not hold a stock that is not already held within the Growth Focus or Dividend Focus portfolio on their own investment merit. Please also note the portfolios screen out non-responsible investments rather than actively seeking responsible investments. 

Currently, six stocks are excluded from the Responsible Portfolios: Advanced Medical Solutions, Ashtead Technology Holdings, Cohort, Gooch & Housego, IQE, and Young & Co’s Brewery.

Current portfolio overview

Unicorn is sector agnostic although its focus on cash-generative businesses precludes higher-risk sectors such as oil, gas, mining, and commodities as well as biotechnology and other early-stage technology companies. The portfolios are expected to hold 25–40 stocks, with no single stock expected to make up more than 5% of the portfolio. 

The growth and dividend portfolios have similar sector exposures but differ in terms of market capitalisation. Overall, almost 60% of the Growth Portfolio is invested in businesses with a market cap greater than £250 million (average £421.7 million). The Dividend Focus Portfolio has a bias towards smaller income-generative companies, with an average market cap of £335.3 million. Around 40% of the businesses within the dividend portfolio have a market cap above £250 million.

The dividend portfolio targets a yield of 2-4% per annum and monthly income payments – variable and not guaranteed.

All portfolio details shown below, including sector breakdown and performance, relate to the wider Growth Focus and Dividend Focus Portfolios, rather than the Responsible Investment Portfolios.

Growth Focus Portfolio - sector breakdown (%)

Dividend Focus Portfolio - sector breakdown (%)

Unicorn AIM IHT Portfolios - market capitalisation breakdown (%)

Examples of portfolio companies

Ashtead Technology Holdings – Growth Focus portfolio

Ashtead Technology is a leading international subsea equipment rental and solutions business, serving the offshore energy sector.

Since its establishment in 1985, the company has grown organically and through strategic acquisitions to become one of the leading providers of rental equipment and solutions in the sector. In Unicorn’s view, the business possesses several key strengths, including strong strategic customer relationships, a crucial role in the subsea supply chain, unique exposure to the energy transition, and an ambitious management team focused on scaling the business over the long term.

In FY 2022 the Group’s revenue grew by 31% to £73.1 million, driven by organic growth, favourable FX rates, and acquisitions. In particular, the company benefitted from an increase in demand from both offshore renewables and the oil and gas markets. Past performance is not a guide to the future.

Ashtead Technology has a current market capitalisation of £305.4 million (June 2023).

Kitwave Group– Dividend Focus portfolio

Founded in North Shields, Kitwave Group (“Kitwave”) began trading in 1987 as a single-site confectionery cash & carry. Today, the group is a wholesale provider of frozen and chilled foods, alcohol, groceries, and tobacco with a network of 29 depots across the UK.

In 2011, Kitwave shifted its growth strategy to focus on mergers and acquisitions. Since then, it has acquired 12 businesses, the most recent being specialist fresh produce wholesaler WestCountry Food. 

In the six months to April 2023, the group announced revenues of £275 million, up 23% compared to H1 2022. The positive performance over the period benefited from a growing customer base following the acquisition of WestCountry Food and M.J Baker. The uptick in revenue and a continued focus on cost control has helped the company preserve its margins against a rising cost base, with gross margin rising from 19.8% to 21.6% during the year. 

The business currently has a market capitalisation of £213.5 million (June 2023).

Victorian Plumbing

As is to be expected, not all investments work out. One example is Victorian Plumbing.

Victorian Plumbing is the UK’s leading online bathroom specialist. In June 2021, the company floated with a share price of 262p and a market capitalisation of £850 million – the largest IPO in AIM’s history. Unicorn invested shortly after, having been impressed by the company’s growth and ability to increase market share. 

However, later in the year the company downgraded its earnings forecast significantly, citing a combination of rising costs and declining sales. In response, shares dropped by more than 40%, falling to 91.5p. 

Unicorn concluded the poor outlook for consumer spending was unlikely to recover and sold the majority of its position in February 2022. 

Performance

The Unicorn AIM IHT Portfolio Service was launched in 2016. The chart below shows the performance of the service over the last five years against a peer group of other AIM ISA portfolios available via Wealth Club. Like other IHT portfolios, this is a discretionary managed service so each portfolio is likely to be different. 

Five-year cumulative performance to 30 June 2023

Access to your investment

Investments in this portfolio are for the long term. However, if your circumstances change, you can sell some or all of your shares, although sometimes this can take a while depending on market conditions and liquidity. Withdrawals are subject to payment of the exit fee and market liquidity. Any amount you withdraw will no longer be IHT free. Withdrawals may result in a Capital Gains Tax liability unless held in an ISA.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. Those considering AIM Inheritance Tax portfolios should be comfortable with the significant risks of investing on AIM.

AIM IHT portfolios should only form part of a balanced portfolio. Your capital is at risk and you should not invest money you cannot afford to lose. The fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan.

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 (spread) of AIM shares is often wider than the spread for shares listed on the main market. 

Eligibility for BPR, based on current rules, 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. Tax rules can change and benefits depend on circumstances.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Charges 

A summary of the main charges and savings for an investment within an ISA is shown below. If you wish to invest outside an ISA, please see the provider's documents. The investment may have additional charges and expenses: please see the provider documents for more details. If you would like a full breakdown or a personal illustration, please let us know.

Exclusive offer: Wealth Club clients receive a reduced annual management charge of 1.5% and dealing fee of 0.7%.

Our view

Unicorn is an established fund manager with significant experience in both the AIM market and in managing UK small-cap portfolios. The team has been investing in AIM for over two decades and also manages the UK’s largest AIM VCT. 

Unicorn appears well placed to manage an AIM IHT Service, particularly given the strong overlap with its other investment mandates, which should provide the service with valuable perspective.

The investment strategy is uncomplicated, targeting established and profitable companies, preferably whose founders or management team have retained a significant stake in their business. 

Investors into the service have a choice between the dividend or growth portfolio, as well as responsible investment options for both portfolios.

Wealth Club clients receive discounts on both the annual management and dealing fees as well as exclusive access to the service for £20,000 (compared to £50,000 normally), making it a contender for this year’s ISA subscription. 

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.