- Chris Hutchinson looks for companies with strong financials and a market leading position
- He's got a great long-term track record
- We think his fund has excellent growth potential
There are some exceptional companies in the UK. Some sell products and services across the globe. Others do something unique and have the potential to grow strongly. Chris Hutchinson and Max Ormiston, managers of the Unicorn Outstanding British Companies Fund, try to invest in the very best ones.
They invest in companies of all sizes but Unicorn is a specialist investor in smaller companies. This helps the managers build strong relationships with the companies they invest in. We think this detailed knowledge gives them an edge over other investors. Investments in smaller companies add risk though.
There aren't many companies that meet the managers' high standards and the fund currently invests in just 31 companies. This means each one can contribute strongly to returns but it's a higher-risk approach.
We think this fund has the potential to do well over the long term and could be a great addition to the UK section of a portfolio. That's why it's on the Wealth 50 list of our favourite funds.
How’s the fund invested?
Hutchinson and his team invest in companies that do something unique. The harder it is for competitors to replicate, the better. So a strong brand, intellectual property and market leading position are all positives.
They look at how the company’s managed too. A strong, experienced senior management team is a must. And they should own a significant amount of the business themselves – that way their interests will be aligned with those of investors.
Keystone Law is a great example. It offers legal services to small and medium-sized businesses. What makes it unique is that its lawyers are self-employed. They have no fixed salary but get to keep 75% of their billings. It's disrupting the entire legal profession and its share price has risen strongly in recent years, though there are no guarantees this will continue. The company's directors own a significant number of its shares too.
The managers have found lots of opportunities in the industrials sector. Recent investments include global flooring specialist James Halstead. They've invested in the company for a number of years through other Unicorn funds so they know it, and its management team, well.
On the other hand, the fund doesn't invest much in the oil & gas and mining sectors, or in big banks and pharmaceutical companies. The managers don’t tend to find companies that meet their 'outstanding' criteria in these areas, and many are complex and non-transparent.
Recent sales include Ted Baker. The managers thought the company's high share price left little room for growth. It's also feeling the heat from online competitors and falling consumer confidence. The company's shares later fell when former CEO Ray Kelvin stood down amid harassment claims from his employees.
How's the fund performed?
The fund’s performed well since launch in December 2006. An investment of £10,000 would be worth £32,082* on 31 March. The broader UK stock market would've returned £19,731. Past performance isn’t a guide to the future though.
We put this strong performance down to the managers' ability to invest in companies with outstanding prospects, whatever size they are or sector they're in.
Unicorn Outstanding British Companies: performance since launch
Past performance is not a guide to the future. Source: Lipper IM to *31/03/2019
|Annual percentage growth|
| Mar 14 -
| Mar 15 -
| Mar 16 -
| Mar 17 -
| Mar 18 -
|Unicorn Outstanding British Companies||3.9%||8.0%||9.4%||7.1%||2.7%|
Past performance is not a guide to the future. Source: Lipper IM to 31/03/2019
The fund didn’t do so well over the past year though. Its focus on smaller companies, which tend to be more sensitive to the health of the UK economy, dragged on returns because of uncertainty over Brexit and other political issues. The managers used the period of stock market weakness to add to some of their favourite investments at lower share prices.
British American Tobacco was one of the fund's worst performers. It faced a number of issues including the threat of new legislation. They've held on to the investment though. The company's still a market leader in its industry and benefits from a high degree of customer loyalty.