Downing Strategic Microcap (DSM ) has lifted its forecast for how much the UK smaller companies fund can return to shareholders in the first phase of its wind-down. 

The £31.1m portfolio now believes it can pay out around half its market value in the first six months of this year if bids for some of its holdings complete in time.

This is an increase on the 20% distribution envisaged for early 2024 when the sub-scale closed-end fund declared its intention for an orderly liquidation on 9 November. 

In an update after Christmas DSM said it expects to return ‘up to or exceeding 50% of the current market value’ within the first half of this year.

If the company continues to receive premium bids for portfolio companies, its board anticipates that ‘more than the remaining market value’ will be realised through the complete wind-down. 

The board chaired by Hugh Aldous said if was consulting with advisers on the most tax-efficient way of returning capital to shareholders.

Shares in DSM rose 1% after the update to 58.5p, a 13% discount to their net asset value of 66.8p on 22 December. 

The fund, which invests in a concentrated list of ‘micro’ stocks under £150m, launched at 100p in May 2017. It suffered early disappointments under fund manager Judith MacKenzie that have left its original shareholders nursing current losses of over 40%.

Numis Securities analyst Andrew Rees said the quick progress on the wind-down was positive. ‘That said, the nature of the portfolio may mean that full returns of capital take some time, and there will be likely be a trade-off between timeliness and value.’