MAM Funds is launching the Acuim UK Multi Cap Income Fund, an open-ended version of the popular Diverse Income Trust that listed earlier this year.

Gervais Williams, renowned smaller companies fund manager, will manage the fund along with Martin Turner, who joined MAM in May.

The fund, which launches on 14 October, will invest across the UK market, from Aim shares to FTSE 100 companies. It will target a yield of 5 per cent.

Williams points out that there are only 33 companies in the FTSE 100 that pay a dividend greater than 4 per cent a year, whereas there are 65 in the FTSE 250 and 67 in the FTSE Aim All-Share that do. ‘Small/mid cap companies are at the beginning of a renewed dividend cycle,’ says Williams. ‘It’s better to be more open-minded and look across the whole market for income.’

The manager says that the compounding effect of dividends is going to become more important. ‘If the stock market doesn’t go up over the next few years due to all the global worries, the only way you’ll make money is through reinvesting income.’

He adds: ‘It’s the right time to launch this fund. The market is down and yields are up.’

The fund will have a diversified portfolio of 80-120 holdings. Holdings include National Accident, DIY firm Chamberlain, online casino 32Red and BT. ‘We like food producers and insurance firms as they are providing essential products. We find them in the All-Share rather than the FTSE 100,’ comments Turner.

The annual management charge for the fund is 1.5 per cent and the minimum investment is £1,000.

The fund will have a similar portfolio to the Diverse Income Trust, which Williams and Turner also manage. The Diverse Income Trust has been on a premium since it launched (currently 4.6 per cent) so the new fund could be a cheaper way to access the pair’s fund management expertise. One difference between the two vehicles is that the trust targets a 4 per cent yield, while the Acuim fund targets a 5 per cent yield. This is because with the fund fees and costs are charged against capial (so all dividend income can be paid to investors) whereas with the trust some costs are charged to income, which lowers the dividend.

The Diverse Income Trust has performed well recently. For performance in the month of September it was ranked third in the 22-strong UK growth and income sector, returning 0.1 per cent, while most of its peers lost money.