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Montanaro UK Income
Montanaro UK Income fund offers something very different from the standard UK equity income fund, given it focuses on small and medium-sized businesses. Each holding will also offer an attractive dividend yield or the potential for dividend growth. The fund's clear process and focus on research has worked consistently well over a very long period.
Our opinion
Charles and the team thrive as small-cap specialists, and have an excellent long-term track record to prove it. The team is vast and experienced, which means it can produce its own high-quality research, rather than relying on external brokers. This also means they are able to find opportunities often missed by others.
Company description
Montanaro is a small and medium-sized companies’ pan-European specialist renowned for its large team of analysts and high quality small-cap research. The firm was founded by Charles Montanaro in 1991 and now looks after over 3 billion euros for clients through its 11-strong dedicated investment team. It is private and independently owned.
Fund manager
An industry veteran, Charles Montanaro has grown his company from scratch to become one of the most respected small-cap asset managers in Europe. He has delivered excellent outperformance over a long and distinguished career. Charles is a real character and his search for hidden gems goes well beyond company research – he often 'holidays' looking for undiscovered tribes in the Amazon!
Find the hardworking, honest entrepreneur with skin in the game, the “good guys”, and you will do fine.
Charles MontanaroFund manager
Investment process
The team starts with a simple philosophy; invest in companies you can understand, buy things which are growing, back quality management, engage with your companies and don't over trade. Wider macroeconomic factors are ignored. The team screens for companies using its own internal quality metrics. Valuations do not form part of this initial process but are considered at a later stage. The team the invests in simple understandable businesses for the long term and is unafraid of completely avoiding complex sectors such as biotech, miners, insurers or banks. Montanaro’s analysts conduct detailed fundamental analysis on every potential holding. Only after a company has passed a number of rigorous internal tests can it be added to the approved list for potential investment. The fund is invested almost entirely in quality mid and small-cap stocks listed in the UK, but up to 20% of the may be invested in companies quoted in the EU, Iceland, Norway or Switzerland.
Risk
Montanaro UK Income fund will typically hold between 40 and 50 stocks at any one time – all of which are given a risk score. The fund's focus on quality has historically helped provide some downside protection in falling markets versus other small-cap funds. It also avoids stocks on AIM (the alternative investment market) which are generally considered higher-risk than shares listed on the main UK stock market.
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