17th Aug 2020 16:04
(Alliance News) - Acorn Income Fund Ltd on Monday reported a sharp drop in assets in the first half but maintained its confidence in its investment strategy.
At June 30, Acorn's NAV per share stood at 303.90 pence each, down dramatically from 406.00p at December 31.
The investment firm's net assets dropped to GBP48.1 million from GBP73.8 million six months earlier.
Acorn declared a 11.50p dividend for the period, up from 10.40p the year before. The firm noted it has declared a 5.75p dividend for the third quarter, an 11% year on year rise.
The company's NAV total return in the first half was negative 22%. Acorn's performance fell compared to the Numis Smaller Cos performance and the FTSE Small Cap which lost 25% and 21%, respectively.
Chair Nigel Ward said: "The first half of 2020 has seen events unfold in a manner that would not have seemed possible at the end of 2019, when December's decisive election outcome provided a welcome year end boost to the UK stock market. The outbreak of the global Covid-19 pandemic during February and March has led to a reduction in output, driving up unemployment and putting pressure on the finances of many companies. The combined effects of these will almost inevitably tip the global economy into recession, expectations of which resulted in major setbacks in investment markets around the world."
"Against these unprecedented market moves, it will not come as a surprise to shareholders that the total return on Acorn's gross assets, which measures the return on the portfolio including all income and costs, was also down sharply."
Ward noted the company's total return performance was "exacerbated by the gearing effect" of the zero dividend preference shares.
"The positive difference in return between the gross assets of the fund and that of the Numis Index may be at least partly explained by the allocation of a proportion of assets to fixed income, which, as might be expected, proved more resilient during this period of turmoil," Ward added.
He also noted the rest of 2020 will see "considerable challenges".
Ward added: "However, the focus of the investment advisers remains on selecting smaller companies with robust dividend growth prospects, backed up by strong balance sheets, supported by a weighting to fixed income which should provide an additional degree of resilience during this period of uncertainty."
Shares in Acorn Income Fund were 0.3% higher in London on Monday afternoon at 261.16 pence each.
By Paul McGowan; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.