Wealth Shortlist Update: Unicorn Outstanding British Companies

We've taken the decision to remove the Unicorn Outstanding British Companies fund from the Wealth Shortlist.

We continue to have conviction in the ability of longstanding fund manager Chris Hutchinson and the broader Unicorn investment team, including co-manager Max Ormiston. However our due diligence into the governance processes that sit behind the fund concluded that it should be removed from the Wealth Shortlist.

We believe the firm's current governance framework could be better at managing investment activities and mitigating risk. We also believe Unicorn carries a high degree of key-person risk, with one individual responsible for a number of the firm's important functions.

At a small fund management business like Unicorn, it's inevitable that some team members are required to take on a wider range of responsibilities than they would at a larger firm, and that governance processes may be less well-resourced. But we believe, despite Unicorn's relatively small size, the firm could be doing more to manage governance-related risks.

Following a period of engagement with the team at Unicorn, we're pleased to see that progress is being made. The firm recently hired a new Operations Director, who could help to reduce key person dependency, and drive further governance-related improvements. Another hire is also anticipated later this year to help bolster the firm's ability to highlight and reduce investment risk.

While the team is moving in a positive direction, we do not currently have the required level of conviction in their approach to continue to include the Unicorn Outstanding British Companies fund on the Wealth Shortlist.

This is not a call based on the fund's performance. The fund has outperformed peers in the IA UK All Companies sector since launch in 2006*. We put this down to the manager's ability to select companies with great prospects, regardless of their size or what industry they're in. Recent performance has been less impressive, but we're comfortable that the fund has performed in line with our expectations, given the managers' investment style. Overall, we think it's positive that the managers haven't changed their longstanding investment approach, and believe the fund still has the potential to perform well over the long term. Past performance is not a guide to the future.

We will continue to monitor the fund's ongoing governance improvements and review our decision after the changes have been fully implemented. As always, we will inform investors if our views change.

This isn't a recommendation to make any changes to a portfolio. Investors should make sure any investments match their investment goals and attitude to risk. If you're not sure if an investment is suitable for your circumstances, please seek advice.

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Past performance is not a guide to the future. Source: *Lipper IM to 30/09/2021.

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