The Investment Process for The Munro UK Dividend Fund is different from every other
collective fund we are aware of in the UK. The difference is that this
fund is managed in a mechanical fashion rather than a discretionary fashion.
In other words the process dictates what to hold and how much. This brings
The first is that the process can be maintained independently
of individuals so it will be the same in ten years or twenty years time.
The second advantage is that the process is not susceptible
to the whims or fancies of an individual and is therefore more consistent
The third advantage is that by dealing with lots
of data in a formalised way using the best technology it allows the fund
to buy and hold a large number of shares. Holding a large number of shares
significantly reduces the risk to an investor.
The fourth advantage is that using a standard process
without a lot of decision making the fund can be run by only a few people.
This reduces the cost and allows us to keep our fees down so you get
A Ten Step Process
We download the current constituents of the selected universe
and remove those companies classified as Investment Trusts. These are
companies that simply invest in other shares and are just investment
vehicles. Removing these and companies that are not forecast to pay
a dividend reduces the universe to about 300 companies. The index is
changing constantly due to takeovers and new companies listing on the
Update Shares Outstanding and Dividend Forecasts.
From published data we extract the exact number of shares outstanding
for each of the 300 odd companies and the most recent dividend forecasts
using consensus estimates.
Adjust for foreign exchange.
A lot of companies report their accounts in currencies other
than sterling, mostly in dollars. Using the prevailing exchange rates
we translate those forecasts into sterling.
Adjust for Share Buy Back plans.
If companies are expected to execute significant share buy back programmes the data for shares outstanding is adjusted.
Calculate the Forecast shares in Issue.
Using this data we then calculate how many shares each company
will have in issue for the next financial year.
Calculate Dividend Payments.
Using the dividend data and the share data we then calculate
how much total cash each company will pay out as dividends in the next
Calculate a Total Dividend.
Using this data we then calculate a total dividend payout for
the 300 or so companies in our universe.
Review Data for Consistency.
At this stage we review all the estimates to ensure they look
reasonable and up to date. In particular we monitor the standard deviation
for each forecast to ensure that it is within an acceptable range.
Calculate a Weight for Each Company.
Now that we know what each company is expected to pay out and
what the total payout is we can calculate a weight for each company
in the universe.
Past performance is not a guide to future returns. The value of investments and the income from them may go down as well as up an is not guaranteed. An investor may not get back the amount originally invested.