The fund was one of the first funds to be launched when the firm was established. Benchmarked against the MSCI UK Index, it is a portfolio of UK companies with strong structural growth opportunities and attractive cash flows.
The fund:
-
Is overseen by a highly experienced team with complementary skillsets
-
Focuses on companies with high and sustainable returns on capital with structural growth opportunities
-
Is a concentrated portfolio with a long-term time horizon
February 2020 - Latest commentary
Equity markets slumped at the end of February as investors reacted to the spread of coronavirus to many countries outside of China and Southeast Asia. Containment hopes have been crushed and a significant negative impact on global growth is now deemed inevitable. The classically risk-off mood saw bonds rally sharply in anticipation of widespread interest rate cuts to attempt to ameliorate any downturn, while economically sensitive commodities, such as oil and industrial metals, fell sharply.
The equity sell-off was broad-based, although sectors most exposed to an economic downturn such as energy and materials unsurprisingly saw the largest falls, whilst utilities and consumer staples were relative outperformers.
Our own portfolio fell marginally less than the overall benchmark, largely as a result of our underweight position in the energy sector relative to the index and a positive selection contribution within the consumer discretionary and information technology groups.
In addition to the positive relative impact of being underweight the oil majors, there was a benefit from not holding several large cap stocks that underperformed, most notably BHP, Vodafone Glencore and WPP. Relative outperformers amongst our holdings included Integrafin, First Derivatives, Taylor Wimpey and Sage. In contrast, holdings impacting negatively were Legal & General, XP Power, Whitbread and Lloyds Banking, while not holding HSBC also made a negative relative contribution.
The main portfolio change in the month was to purchase a new holding in Diageo, the leading international spirits company and owner of well-known brands such as Johnnie Walker whisky and Captain Morgan rum. This was funded by the disposal of positions in Imperial Brands and CRH, along with trimming positions in Glaxo and BP.
The speed and extent of the recent market correction has completely vanquished any previous complacency surrounding the likely impact of the coronavirus. With negative sentiment now at an extreme, some short term respite might be forthcoming. However, a sustainable stock-market recovery will only be established once investors gain confidence that the spread of the virus is under control.
Previous months’ commentaries are contained within the fund factsheets.