Menu

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.

Featured Insights

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£192.7m

Data as at 30/04/2021.

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.

Ceres Power4.9
Keystone Law3.3
Wizz Air 2.9
Experian2.7
Diploma2.3
JD Sports Fashion3.6
Ocado3.1
Entain2.9
AB Dynamics2.7
Flutter Entertainment2.6
Kainos2.8
AVEVA1.6
Softcat1.5
Oxford Instruments1.3
Renishaw1.3
Intermediate Capital2.7
Beazley1.7
London Stock Exchange1.5
Impax Asset Management1.4
Draper Esprit1.0
Gamma Communications3.2
Team171.6
Future1.3
Frontier Developments0.2
4imprint Group0.2
Unite Group2.3
Segro1.6
Watkin Jones1.5
Londonmetric Property0.9
Cranswick2.2
Hilton Food Group1.5
Kerry Group0.9
Fevertree Drinks0.6
Premier Foods0.3
Dechra Pharmaceuticals3.4
Kooth1.0
Genus0.4
Indivior0.2
Inspecs Group0.2
Croda3.3
Smurfit Kappa Group1.0

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 (%)

Ceres Power4.9
JD Sports Fashion3.6
Dechra Pharmaceuticals3.4
Keystone Law3.3
Croda3.3
Gamma Communications3.2
Ocado3.1
Entain2.9
Wizz Air 2.9
Kainos2.8
Rest of Portfolio66.6

Source: SVM, as at 30/04/2021

Sector Exposure (%)

Industrials34.9
Consumer Discretionary26.7
Information Technology12.8
Financials8.7
Communication Services6.5
Real Estate6.4
Consumer Staples5.6
Health Care5.2
Materials4.3

Source: SVM, as at 30/04/2021

Size Analysis (%)

Large Cap47.4
Med/Mid 25044.8
Small/Small Cap18.7

Source: SVM, as at 30/04/2021

Show piebar chart

This Month's Featured Stock

Keystone Law Group

Keystone Law is capitalised at £210m and provides legal services. These include services in the fields of commercial work, litigation and property. It serves a range of sectors including aviation, education, healthcare and retail.

Keystone Law is a platform model that is disrupting traditional mid-market partnerships. Senior lawyers joining the group can bring in clients whilst operating in a framework of greater autonomy, flexibility and earnings potential. These principals can recruit juniors and develop the platform. There is also potential for cross-selling of services. Investment in technology and central support, should enable the group to scale and create operating leverage over the longer-term. Cashflow is good, with principals paid only when fees come in. Keystone shows that it is the business model that matters, and not necessarily the industry.

The pandemic has accelerated Keystone’s growth, as lawyers realise more work can be done from home and can benefit from the legal network that Keystone offers. Keystone adds value by collecting revenue, allowing cash conversion of more than 90%. Its brand is building and its technology can support additional lawyers. It is focused on mid-tier lawyers, and has attracted 300, with a few now joining who are of a more senior, higher calibre. The group estimates that around 30% of business is cross-referred, something that is facilitated by Keystone’s model. Even so, the group estimates it has only approximately 1% of the number of solicitors in the £9bn mid-market segment.

We believe that Keystone can benefit further from network effects as it grows, with scale helping to attract more lawyers to join and assisting cross-selling. We believe Keystone has a resilient business model that can continue to disrupt the UK legal mid-market sector.

Performance

Performance (%)

{{#if periods.length }}
{{/if }}
{{#each series }}
{{ displayName }}
{{ endValue }}
{{/each }}
FundIndex
1 month7.24.4
2021 YTD8.710.0
1 year44.224.4
3 years24.34.7
5 years61.736.5
Since launch*374.1147.8
Source: Lipper, as at 30/04/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202154.624.4+30.2
2020-19.2-19.3+0.1
2019-2.26.5-8.7
201812.41.2+11.2
20178.922.3-13.4
Source: Lipper, as at 31/03/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
550.10p
0.07%
Class B
620.70p
0.08%

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

Source: State Street, as at 14/05/2021.

Commentary

Inflation may be back, but it is less clear what winners and losers it creates. Money printing and lockdown savings are combining with pent-up demand, arming consumers to pay more. Many companies also need to restock. But supply has been constrained in areas ranging from lumber to semiconductors, triggering price spikes as economies re-open.

It is not clear that this inflation will actually become embedded and a long term problem. Investor assumptions about how the rotation to value plays out could also prove misplaced. Bad companies may have a good year but that need not make them good businesses or attractive long term investments.

Bottlenecks might bring trouble for some manufacturers. We can expect some initial jumps in profit in industrial areas, but that could quickly give way to disappointments from companies if supply disruption hits production. Industrials are currently in favour, but it may be that the more scalable consumer services - dependent primarily on labour supply - are actually better placed. The value rally could give way to a more balanced appreciation of business risks as economies re-start.

We can expect price rises to choke-off some of the upsurge in demand. And the next few months may bring some profit warnings from companies hit by the severe problems in semiconductor supply. Chips are vital components in many large products such as cars, but for a few months there may simply be no solution for some manufacturers other than shuttering production lines.

Even where supply can be maintained, but at a higher price, it may not be possible to pass additional costs onto customers. Many products that take months to complete involve the supplier essentially being short of inflation. That is, needing to bear unforeseen cost increases that only emerge after a project starts. Services are now so dominant in developed economies that it is easy to misunderstand the dynamics in manufacturing. Investors need a balanced approach even as inflation picks up.

Performance

In April, SVM UK Growth Fund returned 7.2% compared with the return of 4.4% for the MSCI UK IMI TR Index and 4.2% for the average fund in the IA UK All Companies sector. For the 5 years to 30 April, the Fund is top quartile, returning 61.7%, compared to a return of 36.5% for the MSCI UK IMI TR Index and 46.4% for the average fund in the IA UK All Companies sector. The market pattern currently favours value, but growth businesses with good results are being recognised. A number of businesses have both value and growth characteristics; with strong recovery potential but also growth strategies that should win market share in their sectors.

Trading and results

April saw some portfolio stocks react well to good trading updates. Intermediate Capital and Dechra Pharmaceuticals each hit a new all-time high. There were also good contributions to performance from JD Sports Fashion, AB Dynamics and Gamma Communications. Flutter, Homeserve, Beazley, ASOS and Team 17 lagged in the month.

In April, a new investment was made in fund administrator, JTC. Additional investment was put into Restaurant Group, Kooth and ActiveOpps. ActiveOpps floated this year and provides enterprise software tools worldwide for workforce management and productivity monitoring. To fund these, part sales were made of Homeserve, Premier Foods, Just-Eat Takeaway and LSE. During the results season, SVM has been actively reviewing annual reports, engaging with companies and voting. Despite business progress over the past year, some executive pay proposals have been excessive.

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 30/04/2021.

Inflation may be back, but it is less clear what winners and losers it creates. Money printing and lockdown savings are combining with pent-up demand, arming consumers to pay more. Many companies also need to restock. But supply has been constrained in areas ranging from lumber to semiconductors, triggering price spikes as economies re-open.

It is not clear that this inflation will actually become embedded and a long term problem. Investor assumptions about how the rotation to value plays out could also prove misplaced. Bad companies may have a good year but that need not make them good businesses or attractive long term investments.

Bottlenecks might bring trouble for some manufacturers. We can expect some initial jumps in profit in industrial areas, but that could quickly give way to disappointments from companies if supply disruption hits production. Industrials are currently in favour, but it may be that the more scalable consumer services - dependent primarily on labour supply - are actually better placed. The value rally could give way to a more balanced appreciation of business risks as economies re-start.

We can expect price rises to choke-off some of the upsurge in demand. And the next few months may bring some profit warnings from companies hit by the severe problems in semiconductor supply. Chips are vital components in many large products such as cars, but for a few months there may simply be no solution for some manufacturers other than shuttering production lines.

Even where supply can be maintained, but at a higher price, it may not be possible to pass additional costs onto customers. Many products that take months to complete involve the supplier essentially being short of inflation. That is, needing to bear unforeseen cost increases that only emerge after a project starts. Services are now so dominant in developed economies that it is easy to misunderstand the dynamics in manufacturing. Investors need a balanced approach even as inflation picks up.

Performance

In April, SVM UK Growth Fund returned 7.2% compared with the return of 4.4% for the MSCI UK IMI TR Index and 4.2% for the average fund in the IA UK All Companies sector. For the 5 years to 30 April, the Fund is top quartile, returning 61.7%, compared to a return of 36.5% for the MSCI UK IMI TR Index and 46.4% for the average fund in the IA UK All Companies sector. The market pattern currently favours value, but growth businesses with good results are being recognised. A number of businesses have both value and growth characteristics; with strong recovery potential but also growth strategies that should win market share in their sectors.

Trading and results

April saw some portfolio stocks react well to good trading updates. Intermediate Capital and Dechra Pharmaceuticals each hit a new all-time high. There were also good contributions to performance from JD Sports Fashion, AB Dynamics and Gamma Communications. Flutter, Homeserve, Beazley, ASOS and Team 17 lagged in the month.

In April, a new investment was made in fund administrator, JTC. Additional investment was put into Restaurant Group, Kooth and ActiveOpps. ActiveOpps floated this year and provides enterprise software tools worldwide for workforce management and productivity monitoring. To fund these, part sales were made of Homeserve, Premier Foods, Just-Eat Takeaway and LSE. During the results season, SVM has been actively reviewing annual reports, engaging with companies and voting. Despite business progress over the past year, some executive pay proposals have been excessive.

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.

Dealing - Funds
0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

None
None
None
None
None
None
None
None
None
None
None
Nexus logo
None
None
None

Contact our sales team

With markets dominated by news flow it is important to keep abreast of the influences that are guiding our investment decisions.

Get in touch

The Value Key

The Value Key blog allows our active fund managers and analysts to share their views on a range of topics.

Read the blog