Fund of the week: Tap income in small businesses

Lowland may be in the name, but lowly in performance it isn't. Lowland Investment Company (LSE: LWI) "leaves its UK equity income peers trailing in its wake", says Leonora Walters in Investors Chronicle.

The trust, which has consistently beaten its benchmark in recent years, has delivered a return of 24.7% over one year, 85.4% over three and 325.2% over five years, albeit after some short-term volatility.

Walters puts this down to manager James Henderson's decision to diversify away from the mega caps' favoured by his peers, which he believes are in sectors facing long-term decline.

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Lowland's aim is to generate above-average returns of both capital and income over a medium to long-term horizon. It strives to have no more than half of its portfolio value in FTSE 100 stocks, with the rest made up of small and medium-sized firms (SMEs). Around 8% is invested in Aim-listed companies.

The trust has an ongoing annual charge of 0.62%. Around 30% of it is in industrial stocks, such as engineer Senior, while 26% is in financials, 13% in basic material stocks, and 12% in oil and gas.

Touchscreen technology specialist Carclo has proved a recent strong performer for the company, while Henderson has raised its holdings of strong dividend payers, such as BP and Rio Tinto.