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SVM UK Growth Fund

SVM UK Growth Fund

Rethinking UK growth investment

The Fund’s purpose is to achieve positive returns by investing in businesses that are growing strongly and have a sustainable strategy. These businesses typically demonstrate sound capital discipline and are cash generative in nature giving management wide opportunities to grow.

SVM UK Growth Fund

Rethinking UK growth investment

The Fund’s purpose is to achieve positive returns by investing in businesses that are growing strongly and have a sustainable strategy. These businesses typically demonstrate sound capital discipline and are cash generative in nature giving management wide opportunities to grow.

Overview

Fund Objective

The Fund's aim is to achieve medium to long term capital growth from an equity portfolio selected from UK listed stocks and other permitted securities. Its objective is to beat the FTSE All-Share Index.

Approach

Independent, entrepreneurial thought is at the heart of our approach. Our search for sound growth opportunities for your portfolio takes us off the beaten track to find competitive, disciplined companies capable of sustained growth.

You can invest with confidence in our understanding of what makes a good investment, based on our long history of evaluating UK companies. Companies’ growth comes from their market position, their competitive strengths and the success of their own capital investment.

Investing in this fund, you will be buying scalable, cash-generative companies with a dominant market position and proven management. Our ability to find these companies is what drives the performance of the fund.

Fund Details

Launch Date20 March 2000
BenchmarkFTSE All-Share Index
IA SectorUK All Companies
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£118.4m

Data as at 31/03/2020.

Fund Managers

Margaret Lawson
UK Investment Director
29
Years at SVM
39
Industry Experience

Margaret joined SVM in 1990 as a founding director. She is lead manager of the SVM UK Growth Fund.

Prior to joining SVM, Margaret worked for FS Assurance as manager of the FS Balanced Growth Fund.

Academic Qualifications:
BSc (Hons) Economics

Professional Qualifications:

ASIP

Colin McLean
Managing Director & CIO
29
Years at SVM
45
Industry Experience

Colin was MD of FS Assurance Ltd and FS Investment Managers Ltd between 1974 and 1986. He left this position to be head of investments of Scottish Provident's £2.5 billion funds, one of the group's five senior executives. In 1988 he was invited by Sir John Templeton to be MD of Templeton’s European operations. In 1990 he co-founded SVM.

Colin is a former Governor of CFA Institute and past vice-chairman of CFA UK.

He is a regular contributor to the financial publications and guest on Bloomberg TV & Radio, CNBC, BBC TV and Radio. He is a frequent conference speaker on investment, hedge funds and behavioural finance.

Academic Qualifications:
MBA (distinction) Economic Stats
MA (Hons) Political Economy

Professional Qualifications:

FSIP, FIA, FCSI

Portfolio

Strategies

The SVM UK Growth fund aims to identify best in class companies that can grow faster than the wider market over the medium term. Portfolio businesses are drawn from those that are dominant in their sector, usurpers that will come to own their space and hero franchises utilising fast growing channels. We aim to identify those opportunities earlier than our peers, not at the pioneering stage but when the model is accelerating.

This leads to a flexible diversified portfolio blending a core of sustainable growth stocks, tactical mid-term cyclical holdings and innovative business models focussing on future trends.

Keystone Law3.6
Experian3.5
AB Dynamics2.7
Rentokil Initial 2.6
Johnson Service Group2.6
JD Sports Fashion3.1
Ocado3.1
Wizz Air 2.2
Homeserve 2.2
Flutter Entertainment1.9
Unite Group4
London Stock Exchange3
Beazley3
Segro2
Intermediate Capital2
Kerry Group3.7
Cranswick3.6
Hilton Food Group2.2
Watkin Jones2.1
Reckitt Benckiser1.0
AstraZeneca 3.2
Dechra Pharmaceuticals3.0
UDG Healthcare1.1
Indivior0.1
Kainos2.0
FDM Group1.0
AVEVA0.4
Croda3.1
Gamma Communications2.8
Ceres Power0.3

There are no holdings in this category

Portfolio Structure

As an unconstrained fund we invest in our highest conviction ideas irrespective of market capitalisation, though there will be an emphasis on large cap holdings, or sector. As a consequence The SVM UK Growth Fund portfolio will vary considerably from the benchmark index and from other funds that are in the same IMA sector.

Top 10 Holdings (%)

Unite Group3.8
Kerry Group3.7
Cranswick3.6
Keystone Law3.6
Experian3.5
London Stock Exchange3.5
AstraZeneca 3.2
Beazley3.2
Croda3.1
JD Sports Fashion3.1
Rest of Portfolio65.7

Source: SVM, as at 31/03/2020

Sector Exposure (%)

Oil & Gas0.3
Basic Materials3.1
Industrials24.8
Consumer Goods12.5
Health Care7.4
Consumer Services22.9
Telecommunications2.8
Financials20.4
Technology3.4

Source: SVM, as at 31/03/2020

Size Analysis (%)

Large Cap32.6
Med/Mid 25039.3
Small/Small Cap25.8

Source: SVM, as at 31/03/2020

Show piebar chart

This Month's Featured Stock

Hilton Food Group

Hilton Foods operates meat packing facilities in the UK, and a number of other European countries as well as some in other parts of the world. Each of the plants is operated on a dedicated basis for specific Hilton customers, Including Ahold and Tesco. It is also involved in fish processing, and has expanded into Central Europe, Australia and New Zealand. For Tesco, it supplies sandwiches and ready meals. It has been able over time to broaden its offering, focused on its skills, logistics and storage. Margins are typically just 3%, so careful cost control is key.

Driven by a combination of organic growth and acquisition, the group is now capitalised at £800m, with net debt at 11% of this. We expect return on capital employed to grow over the next three years, with an expansion of revenue and profits. The strongest area of growth is in Australia, where it has established a broad relationship with a major retail customer, Woolworth.

The strength of Hilton’s operating model is in its close long term relations with major supermarkets and its increasingly broad international spread. Combined with a conservative management style and cautious financial structure, we believe it is a more resilient business than most. Its operating model has delivered growth over 25 years. Not all growth businesses need be in technology sectors. Hilton demonstrates that sticking to a business model, with some innovation within its space, can deliver sustainable long term growth.

Performance

Performance (%)

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FundIndex
1 month-22.2-18.5
2020 YTD-29.8-27.9
1 year-19.2-19.0
3 years-11.2-14.0
5 years1.30.0
Since launch*186.1125.4
Source: Lipper, as at 31/03/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
2020-19.2-19.0-0.2
2019-2.23.0-5.2
201812.43.1+9.3
20178.918.4-9.5
20164.8-1.7+6.5
Source: Lipper, as at 31/03/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
415.40p
1.17%
Class B
465.30p
1.17%

SVM funds are priced every working day at 12 noon UK time and prices are updated here shortly afterwards.

Source: State Street, as at 22/05/2020.

Commentary

Stockmarkets move ahead of economic recovery. Economies will resume - but the global economy will change. Some sectors may be unrecognisable. Not just with a legacy of debt but operating with new business models and driven by a changed social agenda. Big companies bailed-out today may be called to account politically for their failure to build-in resilience. Investors may need to focus more on sustainable growth rather than high dividends.

National resilience will demand greater use of tax and legislation to encourage effective business structures. Too many company boards have presided over excessive dividends, share buy-backs, and unreasonable executive rewards – leading to over-borrowed businesses with no buffers for bad times. In contrast, many growth businesses have had to operate with lean capital-lite business models. They may emerge stronger, and even be in a position to acquire weaker rivals.

When the economy re-opens, responsible investing must play a greater role, taking to task boards that incentivise poor short term behaviour. Regrettably, some businesses have been much too quick to put employees onto state support, when other adjustments might have been made.

What are the themes that investors should note - apart from debt and share buy-backs? Companies structured to pay little tax will be one area of risk, often combined with an apparent statelessness. Tax havens can be a virtual home for cruise companies, tech businesses and some private equity, but do not have the resource for bail-outs. A re-set of tax on a global basis seems likely.

Despite all the money being pumped into economies by governments around the world, even lower inflation and interest rates are now likely. This disinflation trend has been in place for more than a decade, but the loss of wealth will cut consumer confidence until that capital safety-net is rebuilt. Low inflation and dividend cuts have a big impact on pension fund liabilities and the balance sheets of many big companies. Younger growth businesses typically suffer less from these legacy problems.

In March, SVM UK Growth Fund returned  -22.2%, compared to a return of  -15.1% for the FTSE All-Share Index and  -18.5% for the average fund in the IA UK All Companies sector. For the twelve months to 31 March, the Fund returned  -19.2%, compared to a return of  -18.5% for the FTSE All-Share Index and  -19.0% for the average fund in the IA UK All Companies sector.

During the month, most stocks fell but there were positive contributions to performance from Ocado, AstraZeneca, Hilton Foods and Cranswick. The month saw sharp falls in travel-related shares and in property, which made less sense. Rising debt makes us cautious on the bank sector.

Your Fund remains fully invested, focused on resilient growing businesses, with low exposure to commodities, oil and banks.

Commentary by
Margaret Lawson
UK Investment Director
Colin McLean
Managing Director & CIO
As at 31/03/2020.

Stockmarkets move ahead of economic recovery. Economies will resume - but the global economy will change. Some sectors may be unrecognisable. Not just with a legacy of debt but operating with new business models and driven by a changed social agenda. Big companies bailed-out today may be called to account politically for their failure to build-in resilience. Investors may need to focus more on sustainable growth rather than high dividends.

National resilience will demand greater use of tax and legislation to encourage effective business structures. Too many company boards have presided over excessive dividends, share buy-backs, and unreasonable executive rewards – leading to over-borrowed businesses with no buffers for bad times. In contrast, many growth businesses have had to operate with lean capital-lite business models. They may emerge stronger, and even be in a position to acquire weaker rivals.

When the economy re-opens, responsible investing must play a greater role, taking to task boards that incentivise poor short term behaviour. Regrettably, some businesses have been much too quick to put employees onto state support, when other adjustments might have been made.

What are the themes that investors should note - apart from debt and share buy-backs? Companies structured to pay little tax will be one area of risk, often combined with an apparent statelessness. Tax havens can be a virtual home for cruise companies, tech businesses and some private equity, but do not have the resource for bail-outs. A re-set of tax on a global basis seems likely.

Despite all the money being pumped into economies by governments around the world, even lower inflation and interest rates are now likely. This disinflation trend has been in place for more than a decade, but the loss of wealth will cut consumer confidence until that capital safety-net is rebuilt. Low inflation and dividend cuts have a big impact on pension fund liabilities and the balance sheets of many big companies. Younger growth businesses typically suffer less from these legacy problems.

In March, SVM UK Growth Fund returned  -22.2%, compared to a return of  -15.1% for the FTSE All-Share Index and  -18.5% for the average fund in the IA UK All Companies sector. For the twelve months to 31 March, the Fund returned  -19.2%, compared to a return of  -18.5% for the FTSE All-Share Index and  -19.0% for the average fund in the IA UK All Companies sector.

During the month, most stocks fell but there were positive contributions to performance from Ocado, AstraZeneca, Hilton Foods and Cranswick. The month saw sharp falls in travel-related shares and in property, which made less sense. Rising debt makes us cautious on the bank sector.

Your Fund remains fully invested, focused on resilient growing businesses, with low exposure to commodities, oil and banks.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

Availability

The fund is a sub-fund within the SVM ICVC Fund, a UK domiciled Open Ended Investment Company, with UCITS status. The Funds are regulated by the UK Financial Conduct Authority.

Dealing into the fund is available daily. Deals are accepted on a forward pricing basis, with 24 hours notice. SVM employs International Financial Data Services (IFDS Group) as third party administrator and transfer agent to our funds.

How to Invest
You can invest directly with us or through a wide variety of third party wraps, supermarkets and life companies.

For each fund in the SVM ICVC range we offer a B share class which is our lowest priced clean share class.

Share class availability via third parties varies depending on their model.

Dealing - Funds
0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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