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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£148.6m

Data as at 31/07/2020.

Fund Managers

Margaret Lawson
UK Investment Director
30
Years at SVM
40
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
30
Years at SVM
46
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.

Ocado4.5
JD Sports Fashion3.1
Flutter Entertainment2.5
Wizz Air 2.4
Homeserve 2.2
Keystone Law3.3
AB Dynamics3.2
Rentokil Initial 3.0
Experian2.9
Johnson Service Group2.0
London Stock Exchange3.2
Unite Group3.2
Beazley2.7
Intermediate Capital2.2
Segro2.0
Cranswick2.8
Kerry Group2.2
Games Workshop2.1
Hilton Food Group1.8
Team171.7
Dechra Pharmaceuticals3.0
AstraZeneca 3.0
Hikma Pharmaceuticals1.0
UDG Healthcare1.0
Indivior0.3
Kainos2.7
Softcat1.3
FDM Group1.0
AVEVA0.7
Avast0.7
Gamma Communications3.5
Croda3.4
Ceres Power1.8
ITM Power0.7

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 IA sector.

Top 10 Holdings (%)

Ocado4.5
Gamma Communications3.5
Croda3.4
Keystone Law3.3
London Stock Exchange3.2
AB Dynamics3.2
Unite Group3.2
JD Sports Fashion3.1
Dechra Pharmaceuticals3.0
AstraZeneca 3.0
Rest of Portfolio66.6

Source: SVM, as at 31/07/2020

Sector Exposure (%)

Oil & Gas2.5
Basic Materials3.4
Industrials24.3
Consumer Goods13.7
Health Care8.5
Consumer Services25.1
Telecommunications3.5
Financials19.3
Technology7.4

Source: SVM, as at 31/07/2020

Size Analysis (%)

Large Cap39.5
Med/Mid 25045.9
Small/Small Cap22.3

Source: SVM, as at 31/07/2020

Show piebar chart

This Month's Featured Stock

Games Workshop Group

Games Workshop manufactures and retails table-top war-game systems and miniatures. It operates 250 stores in the UK and serves over 350 independent retailers. The company also has stores in North America, Continental Europe and Australia. It operates across 23 countries. Capitalised at £3 billion, the business is now more than just a niche retailer serving hobbyists. There is significant potential to extend its Warhammer and Middle Earth game franchises into new areas.

The pandemic has to date had relatively little impact on the business despite temporary store closures. Games Workshop has benefited from changing consumer habits during lockdown, and financial prudence with its balance sheet. It has a strong project pipeline with a first animation, plans for TV, and additional brand extensions in games. The company has signed licensing deals with a range of partners, including Sega and Frontier Developments. There is increasing interest worldwide, with games launched by Russian Polish studios.

The careful way in which Games Workshop has nurtured its franchise has delivered consistent growth in revenue and profits. It shares are now more highly rated, but the group is on the verge of achieving earnings streams that are based on its brand rather than manufacturing or retail operations.

Performance

Performance (%)

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FundIndex
1 month1.4-3.6
2020 YTD-11.8-20.5
1 year-5.6-17.8
3 years3.3-9.1
5 years21.98.5
Since launch*259.4108.7
Source: Lipper, as at 31/07/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
2020-4.3-13.0+8.7
2019-6.00.6-6.6
201816.29.0+7.2
201723.118.1+5.0
2016-3.72.2-5.9
Source: Lipper, as at 30/06/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
467.50p
0.56%
Class B
524.50p
0.56%

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

Source: State Street, as at 13/08/2020.

Commentary

Even in normal years, August can be a difficult month for investors. Volatility is unconstrained by much fundamental company news - headlines are filled with politics and currencies. And holidays typically reduce thoughtful economic and company analysis. Can we expect a rational stockmarket this year?

Initially, as shares began their rebound in late March, little analysis was needed. The market was oversold and it was clear some sectors were well placed to cope. Many challenged businesses in travel and consumer services were able to re-capitalise and investors seemed willing to accept a bad year. After the recovery in growth stocks, cyclicals and “value” joined in the rally from mid-May. All boats were lifted on a rising tide of optimism.

But now, discrimination is essential. Investors are beginning to pay attention to valuations of growth and individual company prospects in troubled sectors. Ratings of some growth businesses will not tolerate any stumbles. And confidence in a quick recovery for cyclicals is giving way to the reality of ongoing hotspots and lockdowns. The new nervous normal makes some businesses almost un-investible. Investors quickly supported cash-calls in travel, retail and leisure – but some of those follow-on investments are already looking hasty. Outside the boom in technology, investment confidence is low.

The summer seems to be bringing realism into “value”. The biggest problem area seems to be traditional banking, now operating in a world where credit assessment is very difficult. Temporary government schemes such as furlough, combined with cheap money and much short term forbearance on tax and rents, confuse credit. In personal lending and SME borrowing, bankers will find it hard to assess the true financial position of more companies and individuals. It leaves a confused outlook for the banking sector.

Prospects are clearer in other areas, particularly growth businesses, consumer staples and many traditional groups with a credible digital strategy. But investors should focus on valuation – it is time to put the stockmarket rally under the microscope. This year August could bring an opportunity for disciplined fundamental investors.

In July, SVM UK Growth Fund returned 1.4%, compared to a return of  -3.6% for the FTSE All-Share Index and  -2.3% for the average fund in the IA UK All Companies sector. For the 5 years to 30 July, the Fund is top quartile, returning 21.9%, compared to a return of 8.5% for the FTSE All-Share Index and 9.5% for the average fund in the IA UK All Companies sector.

During the month, there were positive contributions to performance from Kainos, Gamma Communications, Croda, Renishaw and Flutter. Johnson Services, Ceres and Dart Group lagged. 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 31/07/2020.

Even in normal years, August can be a difficult month for investors. Volatility is unconstrained by much fundamental company news - headlines are filled with politics and currencies. And holidays typically reduce thoughtful economic and company analysis. Can we expect a rational stockmarket this year?

Initially, as shares began their rebound in late March, little analysis was needed. The market was oversold and it was clear some sectors were well placed to cope. Many challenged businesses in travel and consumer services were able to re-capitalise and investors seemed willing to accept a bad year. After the recovery in growth stocks, cyclicals and “value” joined in the rally from mid-May. All boats were lifted on a rising tide of optimism.

But now, discrimination is essential. Investors are beginning to pay attention to valuations of growth and individual company prospects in troubled sectors. Ratings of some growth businesses will not tolerate any stumbles. And confidence in a quick recovery for cyclicals is giving way to the reality of ongoing hotspots and lockdowns. The new nervous normal makes some businesses almost un-investible. Investors quickly supported cash-calls in travel, retail and leisure – but some of those follow-on investments are already looking hasty. Outside the boom in technology, investment confidence is low.

The summer seems to be bringing realism into “value”. The biggest problem area seems to be traditional banking, now operating in a world where credit assessment is very difficult. Temporary government schemes such as furlough, combined with cheap money and much short term forbearance on tax and rents, confuse credit. In personal lending and SME borrowing, bankers will find it hard to assess the true financial position of more companies and individuals. It leaves a confused outlook for the banking sector.

Prospects are clearer in other areas, particularly growth businesses, consumer staples and many traditional groups with a credible digital strategy. But investors should focus on valuation – it is time to put the stockmarket rally under the microscope. This year August could bring an opportunity for disciplined fundamental investors.

In July, SVM UK Growth Fund returned 1.4%, compared to a return of  -3.6% for the FTSE All-Share Index and  -2.3% for the average fund in the IA UK All Companies sector. For the 5 years to 30 July, the Fund is top quartile, returning 21.9%, compared to a return of 8.5% for the FTSE All-Share Index and 9.5% for the average fund in the IA UK All Companies sector.

During the month, there were positive contributions to performance from Kainos, Gamma Communications, Croda, Renishaw and Flutter. Johnson Services, Ceres and Dart Group lagged. 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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