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

A more challenging month for markets prevailed in August as rising bond yields and increasing evidence of a broad-based slowdown in China prevailed over generally strong corporate newsflow. Volumes were weak, reflecting the holiday period and small caps continue to lag. So, it was typical that the ONS chose to release, amid this summer malaise and buried deep in one of its specialist statistical annals, some significant revisions to the UK post-Covid economic data. The impact of this cannot be underestimated. This refined approach now shows that the domestic economy was a full 1.7% stronger than the previous analysis. Enough, in other words, for the UK not only to now be in growth from its pre-Covid levels but also in the middle of the pack amongst its developed European peers. It explains the slightly higher inflation experienced (now riding the down escalator, just like everywhere else) and it demolishes the persistent ‘sick of man of Europe’ narrative, which has pervaded deeply amongst global investors. 

Government finances are in better shape than expectations, the economy is growing faster, employment is high, wage and cost increases have peaked and political stability is around the corner. The UK has an image problem, but it doesn’t have an economic or a structural one. Catalysts like the MIFID sweep away, the Kent review and the Mansion House compact will revive interest. Directors are piling into their own stock, using corporate balance sheets to buy back equity or frequently both. Private equity firms are doing the same, and with increasing urgency, relinquishing the deckchairs and announcing a further steady flow of transactions. Meanwhile, UK funds continue to close, managers are retiring and flows remain negative. The disconnect is staggering and it is demonstrably unsustainable. What an opportunity.

Newsflow was calm for the portfolio, with another approach for a JOHCM UK Growth asset, reflecting the conditions relayed above. This time for Blancco Technology. The price is not a blowout by any means and the fact the stock has settled modestly above the offer price tells the market expectations of a possible counter. We await developments with interest.

On the results side, an excellent set of numbers from Rolls Royce, significantly ahead of both our and market expectations, was suitably rewarded by a nice pop, but there is still plenty more to go for. Negating this to an extent was the small-cap lag alluded to earlier, notably in technology, and some contract delays in the fund’s modest position of Sondrel Holdings. There were no other developments of materiality ahead of the busy September release schedule, which we enter with real confidence.
 

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.

FTSE International Limited (“FTSE”) © FTSE 2017. The Industry Classification Benchmark (“ICB”) and all  rights in it are owned by and vest in FTSE and/or its licensors. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. Neither FTSE, nor its licensors accept any liability for any errors or omissions in the ICB. No further distribution of ICB is permitted without FTSE’s express written consent.

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.