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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£163.1m

Data as at 31/08/2020.

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.

Ocado5.0
JD Sports Fashion3.4
Wizz Air 2.7
Flutter Entertainment2.5
Homeserve 1.9
AB Dynamics3.2
Experian3.2
Rentokil Initial 2.7
Keystone Law2.6
Johnson Service Group2.1
London Stock Exchange3.1
Unite Group3.0
Beazley2.5
Intermediate Capital2.0
Segro1.8
Cranswick2.6
Games Workshop2.4
Hilton Food Group1.7
Team171.7
Kerry Group1.4
Dechra Pharmaceuticals3.1
AstraZeneca 2.7
Hikma Pharmaceuticals1.0
UDG Healthcare0.9
Indivior0.2
Kainos2.5
AVEVA1.3
Softcat1.3
FDM Group1.0
Avast0.7
Gamma Communications3.2
Croda3.1
Ceres Power2.1
ITM Power1.0

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 (%)

Ocado5.0
JD Sports Fashion3.4
Gamma Communications3.2
AB Dynamics3.2
Experian3.2
Croda3.1
Dechra Pharmaceuticals3.1
London Stock Exchange3.1
Unite Group3.0
AstraZeneca 2.7
Rest of Portfolio67.1

Source: SVM, as at 31/08/2020

Sector Exposure (%)

Oil & Gas3.1
Basic Materials3.1
Industrials24.1
Consumer Goods12.8
Health Care8.1
Consumer Services26.6
Telecommunications3.2
Financials18.3
Technology7.9

Source: SVM, as at 31/08/2020

Size Analysis (%)

Large Cap40.0
Med/Mid 25048.4
Small/Small Cap18.8

Source: SVM, as at 31/08/2020

Show piebar chart

This Month's Featured Stock

HomeServe plc

HomeServe provides home emergency and repair services, including plumbing, heating and electrical. It services 6.3 million residential customers via partnerships with utilities, appliance manufacturers and insurers. Almost half HomeServe’s sales are in the UK, with the next biggest markets in the US, France and Spain. It is currently test marketing in Italy and Germany.

Although these are traditional services covering a wide range of trades, the group mainly sells its services through direct mail and digital channels. Digital channels now generate one-third of new policy sales. HomeServe has been growing organically since 2011, with acquisitions to boost its scale in the US. North America represents a significant growth opportunity. It has new global e-commerce businesses under development, and has been growing on a capital-lite basis with strong cashflow.

The group has potential to grow, as well as reducing costs through its HomeServe Now app. It is financially strong and has potential for acquisitions. The transformation of the group’s operating model in recent years appears overlooked by investors. We expect growth, cost savings and selective acquisitions. The Checkatrade branded platform has gained traction this year, bringing growth to the more mature UK business. This and potential in new geographies, replicating the UK model, justifies an above average rating.

Performance

Performance (%)

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FundIndex
1 month5.92.4
2020 YTD-6.6-18.5
1 year3.6-12.7
3 years6.8-8.2
5 years32.917.3
Since launch*280.6113.8
Source: Lipper, as at 31/08/2020, 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
467.00p
2.10%
Class B
524.30p
2.08%

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

Source: State Street, as at 28/09/2020.

Commentary

Leadership is changing in stockmarket indices – pharma and biotech is now the UK’s biggest by capitalisation. Benchmarks tend to lag, with demotion of stocks and sectors typically after they underperform. They may not even at any time be particularly representative of any economy, as fast growing businesses can access private finance and delay listing. The drop in weightings of oil and gas, along with banks and financial services, highlights how much economies have changed. This pattern has been seen in the US Dow Industrial, FTSE All-Share and MSCI Europe. Mid-cap indices, such as the FTSE 250 have done a much better job of capturing the leaders of the future. Indices typically see sector rotation in the rear view mirror.

Pharma and biotech now represent more than 10% of the FTSE All-Share, with banks a little over 6%. Surprisingly the bank weighting still exceeds technology and e-commerce combined. Passive investing has struggled to keep up with the areas of strong growth this year, such as IT services. The proposed IPO of online retailer, The Hut Group, will add to index weightings in e-commerce, but highlights how gradual this process is. A lot of growth can be achieved privately or as a mid-cap company before FTSE 100 inclusion.

The process by which indices are weighted towards the stars of yesteryear, rather than tomorrow’s winners, explains a lot about performance in UK active all-companies equity funds. The FTSE Mid-Cap Index has dramatically outperformed the FTSE 100 for two decades. This has accelerated in 2020, although the pattern in March showed that mid-cap can be more volatile in the very short term.

Fans of passive investing claim it is simply buying the market, cheaply. True, but investors need to think about what the market actually represents at any point in time. This year has made investors and companies alike think hard about how different the future might be. Many expect acceleration of disruption, and failures of companies once considered high quality blue-chips. Might the active/passive pendulum swing back?

In August, SVM UK Growth Fund returned 5.9%, compared to a return of 2.4% for the FTSE All-Share Index and 3.1% for the average fund in the IA UK All Companies sector. For the 5 years to 31 August, the Fund is top quartile, returning 32.9%, compared to a return of 17.3% for the FTSE All-Share Index and 18.4% for the average fund in the IA UK All Companies sector.

During the month, there were positive contributions to performance from Ocado, JD Sports Fashion, Wizz Air and Ceres Power. Keystone Law and new investment, Delivery Hero, 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 31/08/2020.

Leadership is changing in stockmarket indices – pharma and biotech is now the UK’s biggest by capitalisation. Benchmarks tend to lag, with demotion of stocks and sectors typically after they underperform. They may not even at any time be particularly representative of any economy, as fast growing businesses can access private finance and delay listing. The drop in weightings of oil and gas, along with banks and financial services, highlights how much economies have changed. This pattern has been seen in the US Dow Industrial, FTSE All-Share and MSCI Europe. Mid-cap indices, such as the FTSE 250 have done a much better job of capturing the leaders of the future. Indices typically see sector rotation in the rear view mirror.

Pharma and biotech now represent more than 10% of the FTSE All-Share, with banks a little over 6%. Surprisingly the bank weighting still exceeds technology and e-commerce combined. Passive investing has struggled to keep up with the areas of strong growth this year, such as IT services. The proposed IPO of online retailer, The Hut Group, will add to index weightings in e-commerce, but highlights how gradual this process is. A lot of growth can be achieved privately or as a mid-cap company before FTSE 100 inclusion.

The process by which indices are weighted towards the stars of yesteryear, rather than tomorrow’s winners, explains a lot about performance in UK active all-companies equity funds. The FTSE Mid-Cap Index has dramatically outperformed the FTSE 100 for two decades. This has accelerated in 2020, although the pattern in March showed that mid-cap can be more volatile in the very short term.

Fans of passive investing claim it is simply buying the market, cheaply. True, but investors need to think about what the market actually represents at any point in time. This year has made investors and companies alike think hard about how different the future might be. Many expect acceleration of disruption, and failures of companies once considered high quality blue-chips. Might the active/passive pendulum swing back?

In August, SVM UK Growth Fund returned 5.9%, compared to a return of 2.4% for the FTSE All-Share Index and 3.1% for the average fund in the IA UK All Companies sector. For the 5 years to 31 August, the Fund is top quartile, returning 32.9%, compared to a return of 17.3% for the FTSE All-Share Index and 18.4% for the average fund in the IA UK All Companies sector.

During the month, there were positive contributions to performance from Ocado, JD Sports Fashion, Wizz Air and Ceres Power. Keystone Law and new investment, Delivery Hero, 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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