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.
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
December 2020 - Latest commentary
Equity markets continued to rally despite rising Covid-19 infections in the US and UK. Anticipation of further fiscal stimulus and imminent vaccine roll-outs were the main drivers. In the UK, Brexit trade negotiations went down to the wire, but an acceptable trade deal was finally agreed and a no-deal Brexit at month-end was averted. This helped Sterling to rally, thus supporting domestic stocks. More generally, economically sensitive shares were the strongest performers in the UK, with mining stocks being the top performers while the healthcare sector was a notable poor performer.
Our portfolio out-performed the index, capping another good quarter for the fund and a very strong year for relative out-performance, though the overall UK market has undoubtedly been disappointing relative to global equities.
The main positive factor this month was good stock selection, particularly in the financials sector, helped by strong gains in Integrafin, Prudential, Barclays and OneSavings Bank, while not holding HSBC was also beneficial. Other key stocks helping were Flutter Group, which continues to benefit from US on-line gaming growth, while gains in Howden Joinery and Taylor Wimpey reflected good current trading and optimism on the recovery prospects for the domestic UK economy. The main stock detracting was Sage Group, where downgrades to growth following last month’s disappointing results and weaker margin guidance continued to weigh on the shares.
We continue to be comfortable with the current portfolio, the only change this month being an addition to our existing significant position in Integrafin. Recent results have only served to strengthen our confidence in the excellent long term growth prospects for this leading UK investment platform business.
As we enter 2021, the near term drag on the economy from a third national lockdown is clearly unwelcome. From an investment standpoint, however, there are grounds for medium term optimism. The vaccine roll-out should start to make a material difference towards reducing the Covid related deaths quite quickly (being focused on the most vulnerable population sub-groups). We also know that lockdowns do work; although hitherto the benefits have been temporary, the vaccine should bring a more sustained suppression of infections. The UK economy should be recovering strongly by the spring, and this prospect will support a further equity market rally. Beyond this, further gains are possible provided government policy remains supportive.
Previous months’ commentaries are contained within the fund factsheets.