According to data from FE Analytics, the fund has attracted roughly £70m over the past year – which it started at £35m in size – and £50m of that has been invested in just the past three months.
It currently heads up the popular IMA UK Equity Income sector over three and five years, having made 111.35 per cent over the longer period when the average fund made just 31.26 per cent.
Performance of fund vs sector over 5yrs
Source: FE Analytics
Unicorn has been steadily making the fund available on platforms over the past year, and with it receiving a high rating from the FE Research team, it is a good time to ask why it has been so successful and for how long this is likely to continue.
The fund is one of very few equity income funds to concentrate on the small cap sector, which in itself is an attraction for investors looking for diversification.
The vast majority of its rivals gain most of their income from the blue chip defensives on the FTSE 100, which provide a large proportion of the dividends paid on the UK market.
This means that investors who hold two UK equity income funds typically have a high number of cross-holdings, meaning that they are not diversifying their stock-specific risk as much as they may like.
However, it is clear that being in the small cap sector has been a huge advantage for the fund over the past five years.
Unicorn UK Income was launched in 2004. FE Analytics data shows its period of outperformance against its peers did not begin until March 2009, when it began to rebound faster and further than the sector following the 2008 crash.
Performance of fund vs sector since launch
Source: FE Analytics
It is notable that the Numis ex IT small cap index has also rebounded further and faster than the FTSE 100 index over this time.
Performance of indices since May 2004
Source: FE Analytics
McClure has significantly outperformed the index in the rebound, although he underperformed it in the run-up to the market peak before the crash.
The fund has made 215.03 per cent since March 2009 while the Numis ex IT index is up 176.18 per cent.
The strong performance of the smaller companies sector suggests it is not entirely fair to compare McClure’s fund to the majority of his peers, which invest in the larger end of the market.
Hence, while his outperformance is still impressive it is much less than its dominance of the performance tables suggests.
Since the fund launched in May 2004 it has returned almost the same as the Numis ex IT index: 179.13 per cent compared with the benchmark’s 175.5 per cent.
The fact remains, of course, that the fund has done remarkably well in the past four years after underperforming the small cap – and large cap – indices in the five previous years.
This is likely down to McClure's preferred type of company coming into favour after the crisis. According to the FE Research team, the manager’s style involves bold sector calls that have served him well.
McClure has avoided the oil and gas and telecoms sectors, which are favoured by most of his rivals. Both of these areas have underperformed recently.
He has also steered clear of the mining sector, which has struggled to recover over the past few years.
Instead the manager has a high weighting to technology stocks, which have done particularly well since the crisis.
The FTSE All Share Technology index has made 257.84 per cent since March 2009, when Unicorn UK Income’s period of outperformance began.
Unicorn as a fund house has a lot of specialist knowledge in this area, and it has a high weighting to the sector across a number of its funds.
McClure (pictured) is also a strong believer in picking companies with low levels of debt: data from Style Research shows that he has a strong bias to funds with low debt-to-equity ratios.
These companies have been very popular among investors since the financial crisis, pushing up their share prices, although this was not always the case. Before 2008, companies with large levels of cash on their balance sheets were seen as unattractive, with companies that were borrowing to invest regarded as having better growth prospects.
It seems unlikely that companies with high levels of debt will come into fashion any time soon, but a lasting economic recovery could see sectors McClure avoids doing well, hitting his relative performance.
Some managers, including Jupiter’s Philip Matthews, are already looking to debt-laden companies to take advantage of a potential bull run.
McClure’s fund also remains highly dependent on the health of the smaller companies sector, although the FE Research team notes that it has a better track record of protecting in falling markets than most other smaller companies funds.
This makes it prudent to diversify a holding of the fund with other highly rated portfolios that complement it.
The five crown-rated Artemis Income fund has a high weighting to telecoms and the oil and gas sectors, and a minimal amount in technology.
FE Alpha Managers Adrian Frost and Adrian Gosden invest largely in the biggest companies in the market. Artemis Income outperformed Unicorn UK Income between 24 May 2004 – when McClure’s fund was launched – and March 2009.
Unicorn UK Income is available with a minimum initial investment of £2,500 and has an ongoing charges fee (OCF) of 1.59 per cent.
Artemis Income has a minimum initial investment of £1,000 and charges of 1.55 per cent.