The Fund aims to achieve long-term capital growth by investing in UK listed companies across the broad market cap range.

A renewed bout of Brexit nerves and further Covid-19 uncertainty enveloped the month and brought with it the predictable impact on sterling, gilt yields and UK domestic stocks. This is a movie seen many times and long since priced in but the knee jerk reaction still prevails and fundamentals go back into temporary hibernation. UK equities are now firmly in revulsion territory, with allocations at multi-generational lows. And yet they are doing so at time when huge swathes of the market are trading at extraordinarily attractive valuations, when the UK economy continues to outperform expectations on all reasonable measures and when we are seeing a clear and unambiguous pick-up in corporate activity. 

It was a tougher month for the Fund, with two stocks in particular, Rolls-Royce and Rank, suffering appreciable falls and somewhat overshadowing a wealth of good news elsewhere. Rolls-Royce has seen its balance sheet take a much deeper and more prolonged hit from the Covid-19-wrought chaos than we had previously estimated. This has culminated in a comprehensive refinancing package launched after the month end. Notwithstanding this, the share price reaction, fuelled in no small part by the backdrop described above, has been one of near hysteria and utterly divorced from the true fundamental value of the company. Interestingly, this has been since validated by the subsequent strong October move now that clarity has been brought to the situation. In addition, with clear signs of governmental support for SMRs and further milestones cleared in electric aircraft development, the completely overlooked de-carbonization technology story continues to build very strongly and remains one of the key reasons we are in the shares in the first place. 

Rank is a meticulously run company with a thriving digital business and a privileged supply protected position in its venues. Nevertheless, the hasty ushering in of the 10pm hospitality restrictions has had a disproportionate short-term impact on the latter and these fears have manifested themselves in the share price. Like Rolls-Royce, however, the magnitude has been extreme. Strong results were ignored in the rush for the exit doors and valuation considerations cast aside. In fact, this business has earned, and will very likely return to earning, 20-25p per share, putting it on an implausibly low 4-5x earnings. And yet its digital peers trade on many multiples of this. There is clear strategic value in the estate, and we are seeing widespread and rapid consolidation in its sector. As such, it is yet another share in the portfolio with triple-digit upside potential and beyond, in our view.

Elsewhere we had a genuinely transformational event for our PRS platform provider Sigma Capital. The group continues to execute strongly on the provision of high quality, affordable housing sited in desirable areas with strong community bonds. This clear, unmet social need is driving better-than-expected take up, higher-than-expected rents and has now attracted the provision of further credible capital partners which will unlock a further acceleration of growth.  

Continuing on the growth theme, a 34% exit run rate in Science in Sports’ ecommerce business was one of many highlights in a pleasingly robust set of results. With continued product innovation and ambitious expansion plans, this is developing to a really exciting proposition. Finally, we had forecast beating numbers from Vectura, Alfa Financial Software and Accesso Technologies. With rising conviction levels, we have been adding to our positions in all three.

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. All performance figures illustrate performance from the first full day that the Fund held investments. During the period 6 November 2001 to 7 May 2003 the performance record is based on the pre-existing share class that had a higher management fee.

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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 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.