VT Downing Small & Mid-Cap Income Fund

The VT Downing Small & Mid-Cap Income Fund aims to provide investors with an income by investing in a high conviction 'best ideas' portfolio of between 30-50 companies. Our investment process prioritises an attractive yield in conjunction with long-term capital growth.

Your capital is at risk and you may not get back the full amount you invested. Investments in this fund are for the long term and higher risk compared to investments solely in larger, more established companies. Please read full details of the risks here.

Key features

  • Differentiated approach: The fund managers invest in sectors across the market cap spectrum outside of the FTSE 100. This results in high active share relative to both the benchmark index and the IA UK Equity Income peer group.
  • Compounding returns: Businesses with the discipline to regularly compound above average returns on capital can often sustain shareholder value creation through both growth and distributions.
  • Exploiting inefficiencies: The managers invest in areas of competence and focus in on understanding market inefficiencies that can be exploited for alpha generation.
  • Concentrated portfolio: High conviction investment strategy, where the fund managers use only their best ideas in a portfolio of between 30-50 names.
  • Long-term focus: Reinvestment risk is inherent when investing in stock markets. The managers of the VT Downing Small & Mid-Cap Fund seek to look beyond market 'noise' to assess the long-term intrinsic value of companies. The shorter-term focus of the market often undervalues the longer term potential of businesses that can sustain above average returns on capital.
  • Distributions: Income is paid quarterly.

What do I need to know before investing?

  • Where and how is my money invested?

    We invest in a broad spectrum of UK companies, with market capitalisations ranging from £100 million to £4 billion. This wide universe provides the opportunity to find the businesses that we believe can deliver a compelling total shareholder return proposition - long term capital growth and an attractive yield.

    The VT Downing Small & Mid-Cap Income Fund takes a rigorous bottom-up approach involving proprietary research to help build a comprehensive understanding of companies that the fund is investing in. This process helps identify companies with above average returns on capital and management teams with the discipline to allocate capital to sustain those returns and drive shareholder value through capital growth and dividend payments.

    This focus on company corporate governance creates an integrated ESG benefit as strong governance is a prerequisite of shared value creation for shareholders, and positive environmental and social change.

  • What’s the investment process behind our actively managed fund?

    Our typical investment process is laid out below: 

    • Screening c.2500 companies for three approaches to income which offer different blends of yield and capital growth potential.
    • Identify business's with a track record of growing or sustained returns on capital.
    • Build an understanding of a businesses sustainable competitive advantage combined with capital discipline that aims to continue to drive above average returns on capital.
    • Understand why or if a valuation opportunity exists, with a focus on cash generation which is the main driver of value creation and dividend payments.
    • Portfolio construction which blends the three approaches to income to create the optimal risk adjusted total shareholder return proposition.
    • Ongoing monitoring of the portfolio and testing of the investment case.
  • What are the risks?

    Our investment funds are not suitable investments for everyone, so we recommend seeking financial advice. This fund may not be appropriate if you plan to withdraw your money within five years. As with all investments, there are risks you should be aware of and comfortable with before you invest.

    • The value of your portfolio can go down as well as up so your capital is at risk and there is no guarantee you will get your investment back.
    • Any income received from your investment can rise and fall.
    • Investments in this fund are generally higher risk compared to investments in blue chip companies on a main stock exchange.
    • The companies the fund invests in may be more volatile and be less liquid than other investments. 
    • The past performance of a fund is not a reliable indicator of future results.

    Please note this is only a brief overview of the risks involved with investing in the VT Downing Small & Mid-Cap Income Fund. Please read full details of all the risks here before investing.

  • What are the charges?

    These charges cover the management and administration costs of running the fund. These charges reduce the potential growth of your investment.

    Initial charge: 0%

    No exit charge. 

    Annual management charge: 0.75% based on the value of your investment.
    There may be further charges for buying and selling assets for the fund and 'dilution levy' costs associated with entering or exiting the fund, this is to cover costs associated with your transaction.

    Ongoing charges: this is currently capped at 1.00%

    For more information about charges please read the fund prospectus.

  • Who's the team behind the VT Downing Monthly Income Fund?

    The fund is run by Josh McCathie. Josh joined Downing in October 2018 as an analyst for the VT Downing Monthly Income fund and AIM IHT products. He took over as lead fund manager of the VT Downing Small & Mid-Cap Income Fund in April 2021.

    Josh is supported by the wider Downing Fund Managers team, which was established in 2010 by Judith MacKenzie. Judith heads up the 15-strong team who have many years’ experience across both private and public equity markets.

    Downing Fund Managers is a boutique asset management business, drawing on Downing LLP's 30-year venture capital track record.

How to invest

If you are an investor and you would like to invest directly in the VT Downing Small & Mid-Cap Income Fund, you can view and download the application form or click here to be taken to the Valu-Trac platform, where you can invest without paying a platform fee.

Key Investor Information

Current available platforms:

AegonFidelity (Inst)Nucleus
AJ BellFidelity (FFN)Quilter
All FundsHargreaves LansdownStandard life
Barclays StockbrokersJames BrearleyZurich
Canada Life InternationalJames Hay
ElevateM&G Wealth

We are currently working with other platforms so please let us know if yours is not listed above.

We're here to help

If you are a financial adviser, or discretionary fund manager please call us on 020 7630 3319 or email us at sales@downing.co.uk.

If you are a private investor you can speak to our investor relationship team on 020 3828 0975 or email downingfundmanagers@downing.co.uk.

If you wish to receive factsheets for VT Downing Small & Mid-Cap Income Fund via email, please click here.