The company seeks to provide investors with long-term capital growth through a concentrated portfolio of UK listed companies, typically with a market capitalisation below £150 million. The company intends to take influential positions in businesses believed to be undervalued and that could benefit from strategic and operational initiatives to drive performance and unlock shareholder value.
Judith MacKenzie and Nick Hawthorn discuss the Downing Strategic Micro-Cap Investment Trust
Your capital is at risk. Investments and the income derived from them can fall as well as rise and investors may not get back the full amount invested. Investments in smaller companies will normally involve greater risk or volatility than investments in larger, more established companies. Please read full details of the risks here.
What do I need to know before investing?
Where and how is my money invested?
We invest in companies with a market capitalisation of below £150 million, otherwise known as 'micro-cap' companies. These companies have less analyst coverage compared to blue chip companies - on average, there are less than two analysts with published market forecasts per company in the UK micro-cap space.
We look to invest in the companies with a sustainable competitive advantage and a strong management team - at the right price.
We have a rigorous bottom-up private equity approach to investing in stocks. We do our own research and extensive due diligence (which can take up to 18 months) to really get to know a company.
Once we invest in a company, we are able to use our strategic holding (usually a 3%-25% stake) to actively influence the company. For example, we can help to restructure their board, refinance their debt or buy out an old stakeholder. These strategic and operational initiatives can help companies realise value and over the long-term create greater returns for investors.
What's the investment process?
Our typical investment process is laid out below:
- Screening UK micro-cap companies for investment opportunities
- Undertake initial due diligence on a select amount of companies
- Produce a headline investment paper
- Conduct fundamental analysis
- Perform financial modelling
- Determine valuation analysis
- Produce full investment paper
- Invest in companies
- Daily monitoring of 12-18 companies
- Deploy strategic mechanisms to unlock shareholder value. E.g. provide capital to restructure debt
What are the risks?
This company is not suitable for everyone, so we recommend seeking financial advice. Downing is not able to advise on your suitability for investment in the company.
- Past performance should not be used as a guide to future performance.
- The value of shares can go down as well as up, and there is no guarantee that you will get back the amount you originally invested.
- Investing in smaller companies is considered to have higher risks than many other investments.
- Investee companies may be significantly more volatile and be materially less liquid than many other investments, especially in comparison to larger securities.
Please note this is only a brief overview of the risks involved with investing in the Downing Strategic Micro-Cap Investment Trust plc. Please read full details of all the risks here before investing.
What are the charges?
Annual management charge:
1% on market cap.
The ongoing charges for the year ending 28 February 2021 were 1.84%.
These charges represent the company’s management fee and all other operating expenses excluding any finance costs, expressed as a percentage of the average daily net assets during the year.
Who's the team behind the company?
Board of directors
Hugh Aldous - Non-Executive Chairman
Hugh is also chairman of the board of a guernsey investment company and a director of Draper Esprit VCT. Until May 2020 he spent 15 years as a director, and chaired corporate governance of a US (Nasdaq) listed corporation, and until July 2018 he was a director and audit committee chairman of a UK listed fund management company. He has held various directorships, some as chairman or executive chairman, in a number of both private and listed companies. His career includes 35 years of directorships across different sectors, ranging from nationalised industries to private equity. He spent 32 years as a partner, 10 years as managing partner, and latterly Head of Financial Services at Robson Rhodes (now Grant Thornton). He was also a DTI Companies Act Inspector for over 16 years and was a member of the UK Monopolies & Mergers Competition Commission.
Linda Bell - Non-Executive Director
Linda Bell has extensive management experience working in both public and private equity markets. She is currently the CEO of Mirico Ltd, a company commercialising laser spectroscopy into industrial applications. Linda was formerly CEO of PhosphonicS Ltd (acquired by Carbosynth Holdings Ltd in 2017), and a director of Tomra Systems ASA, a supplier of recycling and sorting equipment listed in Norway. She is an Oxford graduate in Natural Sciences (Chemistry) and a DPhil in Organic Chemistry, and worked at ICI, Servomex and DS Smith earlier in her career.
William Dawkins - Non-Executive Director
Will is Head of UK Board & CEO Practice at Spencer Stuart, a global executive search and leadership consulting company. Prior to this he spent 23 years in a variety of posts at The Financial Times, including foreign correspondent with postings in Brussels, Paris and Tokyo, and deputy managing editor, foreign editor, and publishing editor. He is a Cambridge graduate with a master’s degree in English Literature from Trinity College, and attended the Advanced Management Programme at INSEAD. Will also chairs and is a trustee and director of the Evelyn Trust, a medical research grant giving charity based in Cambridge, and is a governor and director of the Perse School, Cambridge.
Robert Legget - Non-Executive Director
Robert has extensive industry experience, having co-founded Progressive Value Management Limited (PVML) in 2000. PVML specialises in creating value and liquidity for institutional investors out of holdings in underperforming companies. He is chairman of PVML and is also a senior independent director of Sureserve Group plc. Robert was formerly a director of Quayle Munro Holdings plc and BMO Private Equity Trust plc (formerly the F&C Private Equity Trust plc). He is a member of the Institute of Chartered Accountants of Scotland and is well respected for his extensive experience in creating value for shareholders.
Judith MacKenzie - Partner
Judith joined Downing in October 2009. Previously she was a partner at Acuity Capital managing AIM-quoted VCT and IHT investments and a small-cap activist fund. Prior to Acuity, Judith spent nine years as a senior investment manager with Aberdeen Asset Management Growth Capital as Co-Fund Manager of the five Aberdeen VCT, focussing on technology and media investments in both listed and private companies. Judith is a non-executive director of the Quoted Companies Alliance and is an active member on boards both in the private and public arenas. Judith founded Downing Fund Managers in 2010, the boutique investment arm of Downing LLP.
Nick Hawthorn - Fund Manager
Nick joined Downing in September 2015 from BP Investment Management, where he worked in the private equity team. Prior to this, he worked for Aberdeen Asset Management in group finance. Nick is a CFA level III candidate and holds a MSc. in Finance and Investment from Durham University and a MA in Accounting and Economics from the University of Aberdeen. He also holds the Investment Management Certificate.
Josh McCathie - Fund Manager
Josh joined Downing in October 2018 as an analyst for the VT Downing Small & Mid-Cap Income Fund and AIM IHT products. He took over as lead manager of the VT Downing Small & Mid-Cap Income Fund in 2021.
Cheryl Vickers - Investment Operations Director
Cheryl joined Downing in 2010 from Rathbones where she gained over 12 years’ experience working on VCT, EIS and IHT portfolio services. Cheryl provides portfolio support and oversight to the Downing Fund Managers funds. Cheryl is a graduate of Keele University and is a Chartered FCSI.
What happens once I've invested?
The company’s annual financial statements will be prepared to 28 February in each year and the company’s annual financial statements will typically be sent to shareholders within four months of its financial year end.
The company also publishes an unaudited interim report covering the six months to 31 August each year, typically within two months of that date.
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None of the information provided is investment or tax advice.
You should always read the associated risks before deciding whether to invest. These can be found on the product pages as well as in our risks overview.
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