Former Investors Chronicle journalist Mark Slater (and son of growth and smaller company investing expert Jim, author of the Zulu Principle) has enjoyed success with his MFM Slater Growth fund which leads well over 200 funds in the UK All Companies sector over three and five years (read our interview on Growth, Slater Style). But last year his company Slater Investments decided to take a foray into the world of income with the launch of MFM Slater Income Fund (Isin: GB00B6YSXJ10). This has done reasonably well positioning it in the second quartile, ahead of the sector average, with a yield north of 4 per cent. But it's still early days, so can a smaller companies growth champion really turn his hand to income?
"We have been income investing for years, just not via a fund," says Mr Slater. "We have been running portfolios for high net-worth individuals and segregated mandates with an income segment. We are finding many opportunities outside the FTSE 100, what is not typically held in an equity income fund, many of which have similar top 10 holdings. Some equity income funds are so large they can't buy companies this small but we have a free hand (MFM Slater Income has assets of around £27m). Concentration has also been a problem for equity income funds as some were in banks, and BP was a critical source of income for many. But some smaller and mid sized companies offer better growth and a yield."
Small and mid-caps account for around 56 per cent of the fund, while Alternative Investment Market (AIM) and FTSE Fledgling shares account for more than 7 per cent. But there is still nearly a third in large-caps as Mr Slater advocates diversified market-cap exposure. The types of companies he looks for fall into three broad categories: