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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 objective of this Fund is to achieve capital growth over the long term (5 years or more) and it aims to outperform the MSCI United Kingdom IMI. The Fund will identify investment opportunities in UK companies that can grow faster than the wider markets and are capable of sustained growth. The Fund will invest at least 80% in equities and equity related instruments in UK companies. The Fund may invest in other permitted securities.

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.

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Fund Details

Launch Date20 March 2000
BenchmarkMSCI United Kingdom IMI Index
IA SectorUK All Companies
Type of SharesAccumulation
XD Date31 December
Pay Date30 April
Fund Size£199.8m

Data as at 31/07/2021.

Fund Managers

Margaret Lawson
UK Investment Director
31
Years at SVM
41
Industry Experience

Margaret joined SVM in 1990 as a founding director. Prior to co-founding SVM in 1990, Margaret was an investment manager at FS Assurance running its flagship UK fund, the FS Balanced Growth Fund. Margaret has successfully managed the SVM UK Growth Fund navigating the markets and finding growth opportunities for over 15 years. She is a recognised expert and frequent writer on domestic and global economic and market issues and is member of CFA Institute and qualified as ASIP.

Academic Qualifications:
BSc (Hons) Economics

Professional Qualifications:

ASIP

Colin McLean
Managing Director & CIO
31
Years at SVM
47
Industry Experience

Colin is the Managing Director and Chief Investment Officer at SVM. He founded SVM in 1990 following successful careers at FS Assurance, Scottish Provident and Templeton. He has helped shape global investment management and is a leading commentator and influencer on professionalism in the industry. Colin is past Chair of CFA UK and was Vice Chair of CFA Institute. He is a regular contributor to financial publications and guest on Bloomberg TV & Radio, CNBC and the BBC. 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.

Ceres Power3.7
Keystone Law3.6
Wizz Air 2.8
Experian2.4
Diploma2.3
JD Sports Fashion3.4
Entain3.0
AB Dynamics2.1
Flutter Entertainment2.1
Games Workshop2.0
Kainos3.1
AVEVA1.8
Softcat1.5
Oxford Instruments1.4
Boku1.3
Intermediate Capital2.6
Beazley1.9
Impax Asset Management1.7
London Stock Exchange1.5
Draper Esprit1.3
Gamma Communications3.5
Future1.8
Team171.7
Dianomi0.6
Kin & Carta0.6
Unite Group2.2
Segro1.9
Watkin Jones1.4
Londonmetric Property1.0
Croda3.9
CRH1.4
Smurfit Kappa Group1.0
Dechra Pharmaceuticals3.9
Kooth0.9
Genus0.6
Indivior0.3
Inspecs Group0.2
Cranswick2.3
Hilton Food Group1.3
Kerry Group1.0
Fevertree Drinks0.6
Revolution Beauty0.4

There are no holdings in this category

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 (%)

Croda3.9
Dechra Pharmaceuticals3.9
Ceres Power3.7
Keystone Law3.6
Gamma Communications3.5
JD Sports Fashion3.4
Kainos3.1
Entain3.0
Wizz Air 2.8
Intermediate Capital2.6
Rest of Portfolio66.5

Source: SVM, as at 31/07/2021

Sector Exposure (%)

Industrials32.8
Consumer Discretionary20.9
Information Technology13.9
Financials10.3
Communication Services8.6
Real Estate6.5
Materials6.4
Health Care5.9
Consumer Staples5.8

Source: SVM, as at 31/07/2021

Size Analysis (%)

Large Cap46.2
Med/Mid 25044.7
Small/Small Cap20.1

Source: SVM, as at 31/07/2021

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This Month's Featured Stock

Microlise Group

Microlise provides transport management technology services, essentially supporting enterprises with digitised data on delivery vehicle movements. Its Software as a Service (SaaS) platform digitises the business processes of enterprise organisations running highly complex logistics operations. It was floated on the London AIM market in July 2021, and is capitalised at £180m. The Group operates predominantly in the UK, and has offices in India, as well as France and Australia.

The telematic services offered by Microlise support organisations to run their businesses more cost effectively and ensure compliance with regulations. It also strengthens safety and customer engagement, with the potential to reduce environmental impact through optimising journeys and logistics. The Group automates and optimises critical processes such as scheduling, routing, driver performance monitoring and resource allocation. Customers get real-time data. Evidence that this service is valued and builds customer satisfaction is shown in the Company’s long term growth record and its dominance in its sector. Its long term customer relationships are evidenced by exceptionally low churn - less than 1% in FY20. Amongst large heavy goods vehicle fleets (500+) the Company claims a 58% share of the UK market with 500,000 vehicle subscriptions. This involves more than 400 enterprise customers, creating an estimated 64% recurring revenue on a SaaS model.

The chief executive has built the business since 1987, leading a management buy-out in 2008. He holds just over 50% of the share capital but did not sell stock into the IPO and seems focused on building the Group further. Microlise has a track record of consistent recurring revenue growth, profitability and cash generation. Microlise has grown primarily organically, but the listing offers the potential to accelerate international expansion and make selective acquisitions. In FY20 the Group grew recurring revenue by 19.0% (of which growth of 15.7% was organic) and total Group revenue grew by 10.1%. Although currently a small cap company, we believe it has the management team and market position within a growing market to allow it to become a much larger one.

Performance

Performance (%)

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FundIndex
1 month3.90.7
2021 YTD12.311.9
1 year36.326.2
3 years21.72.5
5 years66.228.6
Since launch*389.8152.3
Source: Lipper, as at 31/07/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202133.020.3+12.7
2020-4.3-14.6+10.3
2019-6.00.5-6.5
201816.29.3+6.9
201723.117.6+5.5
Source: Lipper, as at 30/06/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
633.70p
-0.58%
Class B
716.90p
-0.57%

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

Source: State Street, as at 27/09/2021.

Commentary

Has equity research changed for ever? Direct engagement with company managements used to be key to understanding businesses, but lockdowns changed that model. At first investment analysts welcomed working from home, but that now has given way to Zoom fatigue. Many more meetings are now possible but are they as effective? Soon, face-to-face meetings will again be possible, and thought is needed to assess what value that might add.

For investors outside London, online calls give much more access, more frequent meetings. Investment boutiques in particular, have gained. This has been helpful in the last 12 months, a period of high activity in IPOs and share placings. That meant lots of new businesses to research, early-look meetings, and fundraisings.

Access to company management – on or offline – helps to build up an understanding of strategy and whether the trend of government policy and industry evolution is favourable. Online calls have been helpful, allowing more access and offering more checkpoints on progress during the year. With a much faster pace of change now, this greater number of touch points is invaluable, particularly in monitoring growth businesses. It has been possible to see companies two to four times in a year, rather than just once or twice. When supply chains and prices are changing more rapidly, this can give insight into just how agile and dominant in their niche companies are.

To get the most out of the access investors should set out their own agenda. That means taking management away from their slide deck, and focusing on the key changes from the last update. Frequent Zoom updates have given good insight into which companies were dealing well with the lockdown challenges. Company accounts are part of the research work, but in an age of disruption, strategy is key. It is likely that unwinding of lockdowns and a move to hybrid working will bring a continuation of online calls as the predominant method of corporate access.

Performance

In July, SVM UK Growth Fund returned 3.9% compared with the return of 0.7% for the MSCI UK IMI TR Index and 1.3% for the average fund in the IA UK All Companies sector. For the 5 years to 31 July, the Fund is top quartile, returning 66.2%, compared to a return of 28.6% for the MSCI UK IMI TR Index and 44.0% for the average fund in the IA UK All Companies sector. In July, market performance was more balanced between growth and recovery. Investor interest continues in growth businesses, given the cooling effect of the third wave on growth, and hopes that central bank intervention would dampen longer term inflation expectations. It appears also that while supply chain bottlenecks are likely to raise short term inflation, the problems may limit the pace of manufacturing recovery. This means that businesses are continuing to invest in resilience and digital services, favouring growth sectors.

Trading and results

July saw good performance in a number of the portfolio’s growth businesses. Experian, Kainos, Dechra Pharmaceuticals, Keystone Law and Croda all made good contributions to performance. Laggards include AB Dynamics, ASOS and Ceres.

In July, a new investment was made in Darktrace. The Fund participated in two new issues; Microlise Group, which has a dominant position in the UK in the specialist area of transport management support services, and Revolution Beauty. To fund these, part sale was made of ITM Power and full sales of Moonpig and Ocado.

Your Fund remains fully invested, including likely recovery beneficiaries and strong growth businesses.

Commentary by
Margaret Lawson
UK Investment Director
Colin McLean
Managing Director & CIO
As at 31/07/2021.

Has equity research changed for ever? Direct engagement with company managements used to be key to understanding businesses, but lockdowns changed that model. At first investment analysts welcomed working from home, but that now has given way to Zoom fatigue. Many more meetings are now possible but are they as effective? Soon, face-to-face meetings will again be possible, and thought is needed to assess what value that might add.

For investors outside London, online calls give much more access, more frequent meetings. Investment boutiques in particular, have gained. This has been helpful in the last 12 months, a period of high activity in IPOs and share placings. That meant lots of new businesses to research, early-look meetings, and fundraisings.

Access to company management – on or offline – helps to build up an understanding of strategy and whether the trend of government policy and industry evolution is favourable. Online calls have been helpful, allowing more access and offering more checkpoints on progress during the year. With a much faster pace of change now, this greater number of touch points is invaluable, particularly in monitoring growth businesses. It has been possible to see companies two to four times in a year, rather than just once or twice. When supply chains and prices are changing more rapidly, this can give insight into just how agile and dominant in their niche companies are.

To get the most out of the access investors should set out their own agenda. That means taking management away from their slide deck, and focusing on the key changes from the last update. Frequent Zoom updates have given good insight into which companies were dealing well with the lockdown challenges. Company accounts are part of the research work, but in an age of disruption, strategy is key. It is likely that unwinding of lockdowns and a move to hybrid working will bring a continuation of online calls as the predominant method of corporate access.

Performance

In July, SVM UK Growth Fund returned 3.9% compared with the return of 0.7% for the MSCI UK IMI TR Index and 1.3% for the average fund in the IA UK All Companies sector. For the 5 years to 31 July, the Fund is top quartile, returning 66.2%, compared to a return of 28.6% for the MSCI UK IMI TR Index and 44.0% for the average fund in the IA UK All Companies sector. In July, market performance was more balanced between growth and recovery. Investor interest continues in growth businesses, given the cooling effect of the third wave on growth, and hopes that central bank intervention would dampen longer term inflation expectations. It appears also that while supply chain bottlenecks are likely to raise short term inflation, the problems may limit the pace of manufacturing recovery. This means that businesses are continuing to invest in resilience and digital services, favouring growth sectors.

Trading and results

July saw good performance in a number of the portfolio’s growth businesses. Experian, Kainos, Dechra Pharmaceuticals, Keystone Law and Croda all made good contributions to performance. Laggards include AB Dynamics, ASOS and Ceres.

In July, a new investment was made in Darktrace. The Fund participated in two new issues; Microlise Group, which has a dominant position in the UK in the specialist area of transport management support services, and Revolution Beauty. To fund these, part sale was made of ITM Power and full sales of Moonpig and Ocado.

Your Fund remains fully invested, including likely recovery beneficiaries and strong growth businesses.

Independent thinking

Monthly analysis and insights from our fund managers

Literature

Latest fact sheet

If you would like a copy of any historic factsheets please email info@svmonline.co.uk

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 SS&C Financial Services International Limited and SS&C Financial Services Europe Limited 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.

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0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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