Every year Money Observer runs the rule over 11 popular fund sectors from which it picks the Premier League team. Find out which investment vehicles made the cut in: Premier League of Funds delivers super returns.
Funds Premier League: Tiddlers can deliver some tasty yields
UK Equity Income Funds
Unicorn UK Income
John McClure continues his reign as the most consistent top-performing fund manager in the UK equity income sector.
He puts his success down to running the £59.4 million Unicorn UK Income fund "with a difference", as it opts for small- and medium-sized companies over the typical dividend giants, and it's this alternative approach that has beaten off rivals.
His also takes a fairly big share to represent a long-term ownership claim on a company (but this is never more than 2.5% of issued share capital), and credits this strategy as contributing to success.
McClure looks outside shares in the FTSE 350 index for growth potential. The fund aims to deliver both sustainable dividends and growth from a diversified portfolio, and currently has 37 holdings.
"A recent buy was Lookers (LOOK), the second-hand car sales firm, as the sector is moving forwards - people may be choosing to stay put in their homes rather than sell, but they are still buying cars," he says. However, recent years have proved tough for McClure, as smaller companies have been battered overall by volatility and fear.
But with more than 20 years' experience, including stints at Guinness Flight and United Friendly Assurance before joining the Unicorn team, he is an expert at riding out any stockmarket storms.
McClure looks at an array of stocks that qualify and then discards the loss-makers, the "blue sky-type companies", those which fail his "business that we understand" test, the ones in declining sectors and the firms he knows well but doesn't expect to perform.
Turning to attractive qualifications, he seeks companies that generate earnings overseas, so they are not reliant on the UK economy, and that have low gearing - so a small amount of debt in proportion to assets. Some of his best performers over the years include international earners that have exposure to China and India.
"If a stock disappoints, we are more likely to still meet the income target than the majority of our peers," says McClure. He focuses on choosing a spread of companies from the entire spectrum of opportunities.
Next up: The Premier League member from the UK All Companies sector.
Subscribe to Money Observer
Subscribe for just £1 and receive 3 issues
New subscribers can take advantage of this fantastic deal with a money-back guarantee if you decide Money Observer isn't for you.