Unicorn AIM (outside an ISA)

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. 

Highlights

  • 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
  • Minimum £50,000

Video interview


The manager

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.

Strategy

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 income portfolio has invested in 30 companies to date, with an average market cap of £297 million. The growth portfolio has invested in 42 companies with an average market cap of £460 million (figures at November 2017). 

Income portfolio companies 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 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. 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). 

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. 

Growth portfolio companies 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 £92.36 million and record profit before tax of £5.64 million (as at 01.04.2017). 

Somero Enterprises®. 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.

Performance

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.

Annual performance - by calendar year to 31 December

  2016* 2017
Unicorn AIM IHT Portfolio Service - Income Portfolio 6.9% 21.3%
Unicorn AIM IHT Portfolio Service - Growth Portfolio 14.3% 42.3%

Risks

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.

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 (£20,000 for top ups)

See example of the total charges over 5 years

Please see the provider's documents for more details on the total fees and charges. 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 and is worthy of consideration. 

Important

The Chancellor has requested a review of a range of aspects of IHT to simplify the tax system. The review timescales, its scope and impact are unknown. Currently, investments qualifying for Business Property Relief should be free from IHT after two years. Tax rules can and do change and benefits depend on circumstances.

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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.01.02.2018

The details

Sector
AIM
Portfolio size
£16.0 million
Initial charge
4.5%
Saving via Wealth Club
3.5%
Net initial charge
1.0%
AMC
2.0%

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