VT Downing European Unconstrained Income Fund

Launched in November 2020, the managers of this European income fund seek to generate returns by identifying high quality companies that have a long term sustainable competitive advantage, with potential to generate growth over time. At the point of entry the valuation of the company is attractive to the fund managers, either because it has fallen out of favour in the short term, or because it is “off the radar” of many other investors.

Your capital is at risk and you may not get back the full amount you invested. Investments in this fund are for the long term and higher risk compared to investments solely in larger, more established companies. Please read full details of the risks here.

Key features

  • Unconstrained investment style: We believe that our unconstrained approach to investing in Europe can offer a reliable and diversified source of income to our investors.
  • Attractive total returns: We aim to provide an attractive total return made up of a healthy dividend yield, dividend growth and capital growth.
  • Disciplined and patient approach: We seek to identify and invest in a relatively concentrated, conviction portfolio of typically 30-40 high-quality businesses, trading on attractive valuations.
  • Fundamental research-driven process: Our investment ideas come from two main sources: contrarian ideas such as high-quality companies that are out of favour with the broader market, and under the radar ideas - lesser-known and under-researched companies from across the length and breadth of the European market.
  • Long-term, patient approach: We expect our holding period to be typically three to five years and portfolio turnover low.
  • Benchmark agnostic, investing across all market capitalisations: We search for ideas and construct the portfolio completely independently of the benchmark index. 
  • Converting fundamental, intensive research into a conviction portfolio: We will only invest in a company having conducted our own intensive research and establishing that the risk/reward profile is firmly in our favour. 
  • Target long-term dividend growth: Our portfolio construction aims to balance the current dividend level, the ability to grow the dividend in the future and the sustainability of the income stream. 
  • Minimum lump sum initial investment: £1,000.
  • Minimum top-up investment: £100.

What do I need to know before investing?

  • How and where is my money invested?

    We seek to generate income and some capital growth over the long term (5 years or more), principally by investing in transferable securities of European issuers. We aim to ensure that at least 75% of the fund’s assets are invested at all times in equities issued by companies based in a Member State of the EU, in Norway, Iceland, Turkey, Switzerland, Russia or the UK. The remainder will be invested in government securities, fixed income, closed ended collective investment schemes/vehicles (which may include those managed and/or operated by the ACD and will provide exposure to various asset classes including equities and bonds), real estate investment trusts, money market instruments, deposits, cash and near cash.

    We adopt an unconstrained approach to investing in Europe, which could offer a reliable and diversifying source of income to our investors:

    • We apply our strict investment criteria across all parts of the European equity market, including under-researched smaller companies.
    • We have a clear understanding of the inefficiencies we are looking to exploit and use our in-depth research capabilities to understand companies not well known to other investors.
    • Our disciplined approach allows us to go against the herd to search for the most attractive income opportunities.
  • What’s the investment process for this European income fund?

    We seek to give clients an attractive total return, which is made up of three parts:

    • A healthy dividend yield – at least the market yield
    • Dividend growth – above the rate of inflation
    • Capital growth

    We aim to provide a diversified source of equity income, through a disciplined and patient approach to identifying and investing in a relatively concentrated, conviction portfolio of high-quality businesses, trading on attractive valuations.

    We follow a bottom-up, fundamental research-driven process, with investment ideas coming from two main sources:

    Contrarian ideas – We are long-term investors (typically holding positions for 3-5 years). Coupled with our in-depth investment research, this allows us to take advantage of negative sentiment to establish positions in high-quality companies when they are out of favour with the broader market. We have the confidence in our approach to hold the position and have patience for our investment thesis to play out.  

    Under the radar ideas – Following an unconstrained approach - and not being bound by market capitalisation, industry or sector - allows us to focus on lesser-known and under-researched companies from across the length and breadth of the European market. The structural changes to the market, such as, MiFID II, shift to passive investing, rise of environmental, social and governance (ESG) and increased focus on liquidity, means these mid and small-cap companies can be an increasingly attractive source of often uncorrelated alpha.

  • What are the risks?

    Our investment funds are not suitable investments for everyone, so we recommend seeking financial advice. This fund may not be appropriate if you plan to withdraw your money within five years. As with all investments, there are risks you should be aware of and comfortable with before you invest.

    • The value of your portfolio can go down as well as up so your capital is at risk and there is no guarantee you will get your investment back.
    • Any income received from your investment in the VT Downing European Unconstrained Income Fund can rise and fall.
    • This European income fund adopts a high conviction approach, investing in typically 30-40 companies, which can carry more short-term volatility than a fund investing across a larger number of companies.
    • The fund has no benchmark: The portfolio is constructed independently of a benchmark index and does not have any particular industry or economic sector focus. As such, weightings may vary as required and investments may be in the same sectors.
    • The past performance of a fund is not a reliable indicator of future results.
    • The fund can conclude various transactions with contractual partners. If a contractual partner becomes insolvent, it can no longer or can only partly settle unpaid debts owed to the fund.
    • External factors can cause an entire asset class to decline in value, which would result in a decrease in the value of investments.
    • The fund may invest in overseas securities, so movements in exchange rates may, when not hedged, cause the value of your investment to increase or decrease.
    • Adverse market conditions may affect the ability to sell certain assets when necessary. Reduced liquidity may have a negative impact on the price of assets.
    • The use of derivatives may result in gains or losses that are greater than the original amount invested.

    Please note this is only a brief overview of the risks involved with investing in the VT Downing European Unconstrained Income Fund. Please read full details of all the risks here before investing.

  • What are the charges?

    The charges you pay go towards the costs of running the VT Downing European Unconstrained Income Fund. These charges reduce the potential growth of your investment. 

    • Entry charge: No initial charge
    • Annual management charge: 0.75% per annum

    The above percentage is based on the net asset value of the sub-fund attributable to the relevant class (plus VAT if applicable).  

    Note that ongoing charges are capped at 1.00% per annum.

    For more information please refer to the prospectus

  • Who’s the team behind the VT Downing European Unconstrained Income Fund?

    Mike Clements – Fund Manager

    Mike has more than 20 years’ experience in the industry and over 12 years’ experience managing European equity portfolios. His investment career began in 1999 as a European equity analyst at UBS Asset Management. In 2008, he moved to Franklin Templeton Investments where he managed the €3 billion Franklin European Growth Fund and related mandates. Between 2014 to 2020, he was Head of European Equities at Syz Asset Management, managing a range of Pan European and Europe ex. UK funds, including the Oyster Continental European Income Fund.

    Pras Jeyanandhan – Fund Manager

    Pras has over 11 years’ investment experience. He began his career in 2005 with KPMG, qualifying as a Chartered Accountant (ACA), before moving to HSBC as a strategy analyst. In 2011, Pras joined Berenberg Bank as an equity analyst, leading coverage on the Financials sector before joining Mike Clements at Syz Asset Management in 2015 as an investment analyst and then portfolio manager. From January 2019, Pras co-managed the Oyster European Opportunities Fund alongside Mike as well as providing support across the other portfolios.

Essential reading

Before you decide to invest, we recommend you seek financial advice. If you wish to receive factsheets for this fund via email, please scroll down to We're here to help.
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Factsheet - February 2021
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Factsheet - January 2021
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Factsheet - December 2020
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Factsheet - November 2020
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KIID - Class A
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Profile
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Downing Fund Managers Guide

How to invest

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Please contact your provider and request a new investment in the “VT Downing European Unconstrained Income Fund”, or contact us at customer@downing.co.uk.

We're here to help

If you are a financial adviser, or discretionary fund manager please call us on 020 7630 3319 or email us at sales@downing.co.uk.

If you are a private investor you can speak to our investor relationship team on 020 3828 0975 or email customer@downing.co.uk.

If you wish to receive factsheets for the VT Downing European Income Fund via email, please click here.