Review – Unicorn AIM IHT ISA
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
The Unicorn AIM IHT Portfolio is run by Chris Hutchinson, a successful and very experienced AIM investor. He invests in a portfolio of AIM shares that aims to take advantage of the Business Property Relief (BPR) rules that means certain companies are exempt from an investor’s estate after two years of investment.
- The manager 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
- ISA available
Unicorn Asset Management is a specialist in UK smaller companies. Unicorn’s AIM VCT is the UK’s largest and this year sold out in less than two weeks. About a third of the £1 billion Unicorn manages is in AIM stocks.
Mr Hutchinson looks for three main characteristics in an AIM company, a tactic that has served him well to date. It must produce consistent growth, without masses of debt; it must sell a product or service that delivers a tangible benefit; ideally the founder and/or management must have a meaningful stake.
Each portfolio will have between 25 and 40 holdings and each company tends to have a market capitalisation of at least £100 million. A long history of paying dividends is preferable. Mr Hutchinson is looking for the “blue chips” of AIM. The 65 companies currently included in the portfolio are worth on average over £300 million. All but two are forecast to be profitable and 60 are expected to pay a dividend in the current financial year although this is not guaranteed.
Income portfolio – some examples
James 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 Royal Caribbean’s "Freedom of the Seas", the world’s largest cruise ship and in very 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. Last year it reported revenues of £226.14 million and record profit before tax of £45.5 million, with a dividend yield of 2.78% (as at 30.06.2016). The market cap is over £1 billion.
RWS 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. Last year it reported record revenues of £121.99 million and record profit before tax of £25 million, with a dividend yield of 2% (as at 30.09.2016). It boasts 13 consecutive years of dividend increases. The market cap is £713 million.
Growth portfolio - some examples
James 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. Last year it reported record revenues of £87.92 million and record profit before tax of £3.87 million (as at 02.04.2016). The market cap is £133 million.
Somero Enterprises®, Inc. is a leading manufacturer of concrete placing equipment and machinery. Its laser technology allows to install concrete faster, flatter and with fewer people. Clients include Tesco, Amazon, Jaguar, Airbus and IKEA. Last year it reported record revenues of £47.40 million and record profit before tax of £11.72 million.
Despite the portfolios being 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: discrete data over the full year is not yet available.
Unicorn AIM IHT & ISA Portfolio Service performance - Growth Portfolio
1 Feb 2016
Unicorn AIM IHT & ISA Portfolio Service performance - Income Portfolio
1 May 2016
Source: Unicorn Asset Management as at 31/12/16. 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.
Liquidity of companies listed on AIM is the key risk in this service, as it can be a volatile market with little trading at certain points. Both the Income and Growth portfolios will be fairly concentrated with between 25 and 40 holdings placing more importance on the stock-picking abilities of the manager.
This is a long-term commitment and capital is at risk: you could get back less than you invest.
Under current rules, BPR-qualifying AIM investments held for at least two years and on death are exempt from IHT, but remember tax rules can change and tax benefits will depend on circumstances.
There is normally an initial charge of 4.5% plus VAT – reduced to 1% through Wealth Club. The annual management fee is 2% plus VAT. In addition, there are dealing fees of up to 0.5% (plus £5 per stock) and exit fees of 1% (except upon death).
Unicorn has always had a small company bias across their range of products and can rightly be called a specialist in this area. 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.
This review is
not intended to be advice or a personal recommendation to buy the investment
mentioned, nor is it a research recommendation. Wealth Club aims to highlight
investments we believe have merit, but investors should form their own view on
any proposed investment.