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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.

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£155.7m

Data as at 31/07/2022.

Fund Managers

Margaret Lawson
UK Investment Director
32
Years at SVM
42
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
32
Years at SVM
48
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.

Keystone Law3.2
Experian2.8
Diploma2.7
Rentokil Initial 2.2
DiscoverIE Group1.7
JD Sports Fashion2.9
Entain2.8
Flutter Entertainment1.8
Games Workshop1.8
AB Dynamics1.4
Kainos3.2
Oxford Instruments1.8
AVEVA1.4
Softcat1.3
Renishaw1.1
JTC2.1
Beazley1.7
London Stock Exchange1.6
Intermediate Capital1.4
Impax Asset Management1.3
Unite Group2.8
Segro2.2
Watkin Jones1.7
Londonmetric Property1.4
Industrials REIT0.2
Dechra Pharmaceuticals4.0
Indivior0.8
Genus0.6
Instem 0.6
Kooth0.5
Croda4.2
CRH1.1
Smurfit Kappa Group1.0
Gamma Communications2.4
Team171.2
Future1.2
Dianomi 0.6
4imprint Group0.4
Cranswick2.5
Hilton Food Group1.8
Marks & Spencer0.5
Revolution Beauty0.1

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 (%)

Croda4.2
Dechra Pharmaceuticals4.0
Keystone Law3.2
Kainos3.2
JD Sports Fashion2.9
Entain2.8
Unite Group2.8
Experian2.8
Diploma2.7
Cranswick2.5
Rest of Portfolio68.9

Source: SVM, as at 31/07/2022

Sector Exposure (%)

Industrials28.8
Consumer Discretionary14.1
Information Technology13.6
Financials9.6
Real Estate8.3
Health Care6.7
Materials6.3
Communication Services5.8
Consumer Staples5.0

Source: SVM, as at 31/07/2022

Size Analysis (%)

Large Cap36.6
Med/Mid 25040.5
Small/Small Cap21.0

Source: SVM, as at 31/07/2022

Show piebar chart

This Month's Featured Stock

discoverIE

discoverIE designs and manufactures innovative components for electronic applications. Four sectors – renewable energy, transport electrification, industrial automation and medical equipment – account for more than three-quarters of its sales. Much of its customised electronics are essential to discoverIE’s customers, offering ability to pass on inflation. The group has been benefiting from the drive to remove carbon emissions and population ageing. Its focus on niche industrial electronics is allowing margin improvement, enhanced by selective acquisitions alongside sale of lower margin activities. Although at a premium rating, the group has a strong order book and enjoys good cash conversion. It has top line sales growth and a record of margin improvement. Currently, gearing is below target levels, giving potential for further acquisitions. A recent trading update showed good organic sales growth in the first quarter and resilient margins.

Performance

Performance (%)

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FundIndex
1 month9.44.3
2022 YTD-30.51.3
1 year-28.57.4
3 years-8.09.0
5 years0.620.4
Since launch*242.0186.4
Source: Lipper, as at 31/07/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
2022-32.13.7-35.8
202133.020.3+12.7
2020-4.3-14.6+10.3
2019-6.00.5-6.5
201816.29.3+6.9
Source: Lipper, as at 30/06/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
430.80p
3.11%
Class B
490.70p
3.13%

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

Source: State Street, as at 16/08/2022.

Commentary

Summer sees political and macro-economic events dominate the headlines, as company reporting slows. City research is much reduced as are trading volumes. Much macro analysts’ research is rarely very useful, in any event. This corporate news vacuum sets the scene for sharp share price moves, often informed more by sentiment than substance. This year fits that seasonal pattern, with the additional factor that many shares looked oversold after six months of panic.

The stock market has travelled to the point at which US Federal Reserve plans are clear, leaving the uncertainty of what is largely guesswork about the risk of embedded inflation beyond central bank control. Investor attention is focusing on the US as a leading indicator – given its more buoyant economy, with a range of economic numbers coming in stronger than expected. Technically the US has hit two quarters of declining GDP, but there is little indication from employment, manufacturing and consumer spending data that a major sustained recession is imminent.

However, risks are increasing in Europe despite currently positive GDP numbers. The spike in gas prices could hit Germany in particular. The ECB has yet to give much detail on how it can defend the Euro when investors are so nervous about Italy. The Eurozone is likely to be a negative influence on the UK economy over the next year. But investors are more comfortable with economic disappointment than scary political surprises or international conflict. July’s stock market pattern suggested that investors are coming to terms with this year’s changed geopolitics.

This leaves the UK economy favourably impacted by the US but at risk from the EU. However, a new Prime Minister is likely to stimulate more actively, probably at the time when the economy most needs it. The argument for tax rises and austerity has been lost for now. That may explain some of the recent rally in business services companies, even though still rated at a premium to market averages. Investors appear to be recognising that growth merits a premium, albeit reduced from last year’s levels. The UK with an independent central bank and its own currency, has the flexibility to set its own course through the global slowdown and could benefit from a revitalised government. A calmer bond market may emerge from confidence in US Fed and Bank of England policy, underpinning equity sentiment.

Performance

SVM UK Growth Fund returned 9.4% compared with the return of 4.3% for the MSCI UK IMI TR Index and 5.7% for the average fund in the IA UK All Companies sector. For the 5 years to 31 July, the Fund returned 0.6%, compared to a return of 20.4% for the MSCI UK IMI TR Index and 15.9% for the average fund in the IA UK All Companies sector.

Trading and results

Positive contributions to performance over the month were Kainos, Croda, Diploma, Experian, Ashtead and JTC. Negatives included Ideagen, Keystone Law, Kooth, Entain and Kape Technologies. In the first half of the year, many portfolio companies reported good results but negative sentiment and de-rating brought back share prices. In August, the market mood turned positive, delivering some sharp rebounds in share prices. During the month an addition was made to Dechra Pharmaceuticals, and sales were made of ASOS, Delivery Hero, Johnson Services, Ideagen, Seeing Machines and 888.

The Fund remains fully invested, focused on well funded resilient businesses with pricing power which should be able to pay up for their inputs and raise wages. It also includes some investments with recovery potential.

Commentary by
Margaret Lawson
UK Investment Director
Colin McLean
Managing Director & CIO
As at 31/07/2022.

Summer sees political and macro-economic events dominate the headlines, as company reporting slows. City research is much reduced as are trading volumes. Much macro analysts’ research is rarely very useful, in any event. This corporate news vacuum sets the scene for sharp share price moves, often informed more by sentiment than substance. This year fits that seasonal pattern, with the additional factor that many shares looked oversold after six months of panic.

The stock market has travelled to the point at which US Federal Reserve plans are clear, leaving the uncertainty of what is largely guesswork about the risk of embedded inflation beyond central bank control. Investor attention is focusing on the US as a leading indicator – given its more buoyant economy, with a range of economic numbers coming in stronger than expected. Technically the US has hit two quarters of declining GDP, but there is little indication from employment, manufacturing and consumer spending data that a major sustained recession is imminent.

However, risks are increasing in Europe despite currently positive GDP numbers. The spike in gas prices could hit Germany in particular. The ECB has yet to give much detail on how it can defend the Euro when investors are so nervous about Italy. The Eurozone is likely to be a negative influence on the UK economy over the next year. But investors are more comfortable with economic disappointment than scary political surprises or international conflict. July’s stock market pattern suggested that investors are coming to terms with this year’s changed geopolitics.

This leaves the UK economy favourably impacted by the US but at risk from the EU. However, a new Prime Minister is likely to stimulate more actively, probably at the time when the economy most needs it. The argument for tax rises and austerity has been lost for now. That may explain some of the recent rally in business services companies, even though still rated at a premium to market averages. Investors appear to be recognising that growth merits a premium, albeit reduced from last year’s levels. The UK with an independent central bank and its own currency, has the flexibility to set its own course through the global slowdown and could benefit from a revitalised government. A calmer bond market may emerge from confidence in US Fed and Bank of England policy, underpinning equity sentiment.

Performance

SVM UK Growth Fund returned 9.4% compared with the return of 4.3% for the MSCI UK IMI TR Index and 5.7% for the average fund in the IA UK All Companies sector. For the 5 years to 31 July, the Fund returned 0.6%, compared to a return of 20.4% for the MSCI UK IMI TR Index and 15.9% for the average fund in the IA UK All Companies sector.

Trading and results

Positive contributions to performance over the month were Kainos, Croda, Diploma, Experian, Ashtead and JTC. Negatives included Ideagen, Keystone Law, Kooth, Entain and Kape Technologies. In the first half of the year, many portfolio companies reported good results but negative sentiment and de-rating brought back share prices. In August, the market mood turned positive, delivering some sharp rebounds in share prices. During the month an addition was made to Dechra Pharmaceuticals, and sales were made of ASOS, Delivery Hero, Johnson Services, Ideagen, Seeing Machines and 888.

The Fund remains fully invested, focused on well funded resilient businesses with pricing power which should be able to pay up for their inputs and raise wages. It also includes some investments with recovery potential.

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 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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Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 440

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