The Fund aims to achieve long-term capital growth and to generate a dividend yield that is above that of the FTSE All-Share Index average. The Fund focuses predominantly on stocks within the FTSE 350 Index that generate a prospective yield above that of the FTSE All-Share Index average. The Fund's performance benchmark is the FTSE All-Share Total Return Index denominated in sterling.Please note that for capacity reasons the Fund is now 'soft-closed' to new direct investors.

The Swiss Central Bank became the first authority in a major developed nation to cut interest rates during this economic cycle. Trends elsewhere in the world suggest that other central banks will not be too far behind, with the UK possibly easing its policy before the Federal Reserve and the European Central Bank (ECB). The rate of UK inflation continues to fall, with the February CPI print of 3.4% (compared to 4.0% in January), with goods inflation only running at 1.1% vs 13.4% a year ago. Food inflation peaked at almost 20% in March 2023 but is now at 5% and likely to slow further in the coming months. Regular readers know that this 3.4% CPI print is merely a stepping stone on the path to below 2% within a couple of months as base effects continue to have a powerful impact.

The UK stock market was strong in March (with the FTSE All Share up 4.46%). Within this overall positive trend, there was a decisive change in market leadership, which benefited the Fund. The Fund was up 7.89% - outperforming the market by 3.28%. Year-to-date, the Fund is up 5.54% compared to the market, which is up 3.43%. 

The leadership change seen during March was driven by the confluence of positive factors; lower inflation, clear signs that central banks will cut rates and a gradual upswing in growth have created a more constructive backdrop. This shift has led to a performance reversal of the previously strong defensive sectors, which we believe are still overpriced. Conversely, cyclical sectors, the financial and commodity sectors (i.e. where the Fund is present) are now outperforming. Additionally, an increase in M&A, along with a very strong results season in aggregate, have also contributed to this mix shift. We added two new stocks to the Fund: Centrica and Morgan Advanced Materials. The decision aligns with a key theme from the results season, which was also a takeaway from our meeting with the CEO of BP post their results. This discussion highlighted the anticipated surge in demand for electricity (and other energy sources) due to developments such as AI/datacentre requirements. Morgan Advanced Materials is a global market leader in the production of advanced carbon and ceramic materials and has been on our radar for the last ten years, but we have never acquired it. These materials are poised to benefit significantly from the anticipated rise in electricity use.

One swallow does not make a summer, but we are encouraged by the change of leadership and tone in the market in March. Falling inflation has seen the market anticipate changes in the economic outlook, whilst many companies with very low valuations have started to take action on their businesses to highlight and release value, with TP ICAP and ITV prime examples this month. Finally, whilst the Fund had a strong March, the average UK equity income fund actually underperformed the index this month. We have highlighted before that there are very few funds or strategies in the market with a genuine value bias anymore as style drift has proliferated across the board. We think investors should ensure they have a healthy allocation to UK equity funds and have exposure to the right kind of UK equity fund, which will benefit from the UK market coming out of the wilderness.        

Data shown net of fees, net income reinvested. Please note that all fund performance is shown against the FTSE All-Share TR 12pm adjusted. Performance of other share classes may vary and is available on request.Where shown, monthly returns table shows compounded discrete monthly performance.

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Past performance is no guarantee of future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. The annual management charge is deducted from the capital of the Fund. This will increase the income from the Fund but may constrain or erode potential for capital growth. The Funds investment include shares in small-cap companies and these tend to be traded less frequently and in lower volumes than larger companies making them potentially less liquid and more volatile.