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.

Style leadership was very volatile during June. The period began with value stocks posting a strong recovery as European lockdowns were eased, further stimulus measures enacted and clearer evidence of a nascent economic recovery emerged. However, the latter part of the month saw a partial reversal, as virus case numbers accelerated in a number of the southern states in the US. 

The volatile intra-month leadership was reflected in a mixed set of stocks driving the Fund’s relative performance. In general, the mining sector continued to perform well, with Anglo American and Glencore both up around 10% relative, helped by the recovery in the copper price. Life insurers also continued to regain ground lost earlier in the year as concerns about their exposure to weakening corporate credit receded; both Aviva and Legal & General were up 8% relative. Evidence that the downturn in Asia was bottoming out also helped Standard Chartered outperform by around 15%, whilst elsewhere in financials strong results from Polar Capital (+16% relative) and Randall & Quilter (+15% relative) were notable features. A resilient update from SThree helped it to outperform by 14% relative. Finally, a strong operational update from Hipgnosis led to 7% outperformance relative during the month. 

The underperformers were a mixed bag, although a number were small companies that suffered from some selling of positions by other managers. In that regard Headlam (-16% relative), Redde Northgate (-10% relative), and U&I (-11% relative) were somewhat harshly dealt with by the market. National Express (-12% relative) was hit both by concerns about the development of the virus in North America and the departure of its CEO to Persimmon. ITV underperformed by 10% relative, partly because it had recovered strongly in May, and partly due to some uncertainties around short-term advertising trends and possibly the lack of progress in the Brexit negotiations.    

After a busy few months in terms of changes, portfolio activity was muted in June. This is because we now feel we have a strong portfolio of high quality value names - please see our recent paper The Value Puzzle for more details. Having made changes to reduce the direct risk that Covid-19 created in small parts of the Fund (e.g. commercial property) whilst introducing several new names during the initial market sell-off and after recapitalisations (at compelling valuations), it is time to let the portfolio breathe.

As we move forward, what catalyst(s) will change the current market dynamics where growth stocks remain in the ascendant? There are many possibilities: a recovery in the global economy; a wave of M&A activity that exploits cheap stock market valuations; companies executing their plans well and delivering the improvements we expect; a vaccine for Covid-19; evidence of the virus coming under control in the developed world; or unprecedented fiscal and monetary policy gaining clear traction. The market is currently positioned for none of these things to happen – we think this is unlikely.

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.