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£500m UCITS employee ownership fund planned by UK specialist Capital Strategies

Will be based on long-running index that is now calculated by FTSE

A UCITS-regulated fund specialising in companies with strong employee ownership credentials is being planned by UK-based specialist investment firm Capital Strategies – which hopes the vehicle will grow to £500m (€624m).

Capital Strategies, which set up the UK Employee Ownership Index in 1995, says the decision to pass calculation of the index to FTSE last year has given it “the foundations” for an investment fund to track the index.
The index tracks listed companies which have 3% or more of their shares held by or for the benefit of employees other than main board directors. There is a separate version of the index for companies that are 10% or more employee-owned.
The fund will launch with at least £10m, the firm says, adding: “The long-term aim is to create a £500m fund.” Co-founder Nigel Mason, speaking at the PIRCConference last week, said he was hopeful the launch would happen later this year.

The idea is the fund will solely invest in a subset of companies in the index, chosen for size and liquidity with weighted according to market capitalisation.

The index was originally launched more as a publicity exercise, Mason said, but the decision to launch a fund stems from interest shown by potential investors over the years; he added: “A number of investors would see it as a positive ESG criterion.”

Companies in the index include companies such as insurer Admiral, retailer Sports Direct, British Telecom and outsourcing firm MITIE, which stands for ‘Management Incentive Through Investment Equity’.

Mason said average annual performance of the index is 13.8%, and that it has returned 11.5% in the year to date. It has a significant weighting to non-bank financial services.