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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 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£175m

Data as at 28/02/2021.

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.

Ocado3.7
JD Sports Fashion3.6
Wizz Air 3.4
Entain2.7
Flutter Entertainment2.7
Keystone Law3.4
AB Dynamics2.5
Experian2.4
Rentokil Initial 2.2
Diploma2.0
London Stock Exchange2.8
Intermediate Capital2.4
Unite Group2.1
Beazley1.9
Segro1.6
Games Workshop2.5
Cranswick2.2
Team171.7
Hilton Food Group1.5
Watkin Jones1.4
Kainos2.7
AVEVA1.8
Softcat1.3
DiscoverIE Group1.1
First Derivatives0.5
Ceres Power5.2
ITM Power2.1
Dechra Pharmaceuticals3.1
Indivior0.2
Genus0.2
Croda3.3
Gamma Communications2.9

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 Power5.2
Ocado3.7
JD Sports Fashion3.6
Wizz Air 3.4
Keystone Law3.4
Croda3.3
Dechra Pharmaceuticals3.1
Gamma Communications2.9
London Stock Exchange2.8
Kainos2.7
Rest of Portfolio65.9

Source: SVM, as at 28/02/2021

Sector Exposure (%)

Consumer Services31.1
Industrials26.1
Financials16.9
Consumer Goods12.6
Technology8.6
Oil & Gas7.3
Health Care3.5
Basic Materials3.3
Telecommunications2.9

Source: SVM, as at 28/02/2021

Size Analysis (%)

Large Cap46.4
Med/Mid 25048.4
Small/Small Cap17.5

Source: SVM, as at 28/02/2021

Show piebar chart

This Month's Featured Stock

Smurfit Kappa Group

Smurfit is a global paper packaging manufacturer, operating more than 350 mills and plants in 35 countries across Europe and the Americas. Europe accounts for three-quarters of sales and focuses on container board, typically used for corrugated boxes. Two-thirds of customers are in fast moving consumer goods and the group’s strength is in having established manufacturing bases local to customers, typically needing to be within 200 miles of the customer.

The packaging market remains very tight globally, with signs that input prices are beginning to rise and will feed through in kraftliner and box pricing. Box demand also remains robust, driven by e-commerce. Box pricing is starting to improve and should be more visible in the second half. Industrial recovery and a customer focus on sustainability are still at an early stage. We see potential for further industry consolidation.

In February, there were reports that Mondi, a low cost long containerboard business, was considering an approach to DS Smith. Smurfit has net cash and has been able to grow by acquisition with some organic growth. We believe its shares are not highly rated.

Performance

Performance (%)

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FundIndex
1 month-0.52.2
2021 YTD-1.41.4
1 year17.01.7
3 years16.30.9
5 years46.329.8
Since launch*330.0128.4
Source: Lipper, as at 28/02/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
20207.0-11.7+18.7
201927.118.5+8.6
2018-15.6-9.7-5.9
201724.613.1+11.5
2016-2.817.5-20.3
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
526.80p
0.13%
Class B
593.50p
0.14%

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

Source: State Street, as at 05/03/2021.

Commentary

How useful are indices? Passive investors may view them as an aid to low cost investment, replacing or alongside active management. But the last 12 months has shown some shortcomings. Indices themselves may not be a good representation of the economy, or of the best listed companies available.

The Hill Review of UK listings, published this month, said of the FTSE Index; “the most significant companies listed in London are either financial or more representative of the ‘old economy’ than the companies of the future”. And the report also highlighted another concerning trend; the number of listed companies in the UK has fallen materially from its 2008 peak, as companies are acquired or go private. Investors in UK equities should note both these stockmarket patterns.

Many companies are now choosing to delay IPO, as a well-financed private equity eco-system provides ready finance for rapid growth. Successful businesses are staying private for longer, with investor access primarily through private equity or listed funds specialising in private assets. Remarkably, the FTSE 100 itself includes management groups and funds specialising in private equity and alternatives, such as Scottish Mortgage, Intermediate Capital and Pershing Square. Passive funds replicating the FTSE 100 Index now include actively managed investments but with an additional layer of cost.

With disruption likely to continue in many sectors - irrespective of any pick-up in inflation or rotation to value - growth will remain scarce. The fastest growing businesses are more likely to remain outside the market or to be a small part of traditional indices. The Hill Review should create opportunity for a more dynamic London stockmarket, attracting listings of bigger global growth businesses. But for now, the value in the Review is in highlighting how much the world has changed since the main indices were designed. As the Report puts it; “at one point last summer, Apple alone was worth more than the combined value of every company in the FTSE 100”.

Performance

In February, SVM UK Growth Fund returned -0.5% compared with the return of 2.2% for the MSCI UK IMI TR Index and 2.8% for the average fund in the IA UK All Companies sector. For the 5 years to 28 February, the Fund is top quartile, returning 46.3%, compared to a return of 29.8% for the MSCI UK IMI TR Index and 38.7% for the average fund in the IA UK All Companies sector. Investors are currently focusing on shares with rebound and pricing potential. But some of these are already at new 12 month highs and so caution is needed. Value rotations have been sharp in recent years but typically lasting just one or two quarters. The portfolio includes some recovery shares such as Next, Restaurant Group and Wizz Air.

Trading and results

February was a mixed month for growth and value in UK equities, as concern continued on lockdowns. There were further hits to travel and hospitality, but higher expectations of inflation. During the month, there were positive contributions to performance from Wizz Air, JD Sports Fashion, Entain, LSE, Johnson Services and ASOS. Laggards were primarily the lockdown beneficiaries that performed well in 2020; including Ocado, Experian, Delivery Hero, and Games Workshop. Ceres also saw profit-taking. During the month additional or new investment was made in Restaurant Group, Whitbread, Smurfit Kappa and The Hut Group. To fund these, sales were made of the holdings in AstraZeneca and Manolete Partners, with part realisations of Kingspan and Kerry Group. In recent months the portfolio has seen bid approaches for Applegreen (agreed), Entain (rejected) and Arrow Global.

Your Fund remains fully invested, focused on resilient growing businesses.

Commentary by
Margaret Lawson
UK Investment Director
Colin McLean
Managing Director & CIO
As at 28/02/2021.

How useful are indices? Passive investors may view them as an aid to low cost investment, replacing or alongside active management. But the last 12 months has shown some shortcomings. Indices themselves may not be a good representation of the economy, or of the best listed companies available.

The Hill Review of UK listings, published this month, said of the FTSE Index; “the most significant companies listed in London are either financial or more representative of the ‘old economy’ than the companies of the future”. And the report also highlighted another concerning trend; the number of listed companies in the UK has fallen materially from its 2008 peak, as companies are acquired or go private. Investors in UK equities should note both these stockmarket patterns.

Many companies are now choosing to delay IPO, as a well-financed private equity eco-system provides ready finance for rapid growth. Successful businesses are staying private for longer, with investor access primarily through private equity or listed funds specialising in private assets. Remarkably, the FTSE 100 itself includes management groups and funds specialising in private equity and alternatives, such as Scottish Mortgage, Intermediate Capital and Pershing Square. Passive funds replicating the FTSE 100 Index now include actively managed investments but with an additional layer of cost.

With disruption likely to continue in many sectors - irrespective of any pick-up in inflation or rotation to value - growth will remain scarce. The fastest growing businesses are more likely to remain outside the market or to be a small part of traditional indices. The Hill Review should create opportunity for a more dynamic London stockmarket, attracting listings of bigger global growth businesses. But for now, the value in the Review is in highlighting how much the world has changed since the main indices were designed. As the Report puts it; “at one point last summer, Apple alone was worth more than the combined value of every company in the FTSE 100”.

Performance

In February, SVM UK Growth Fund returned -0.5% compared with the return of 2.2% for the MSCI UK IMI TR Index and 2.8% for the average fund in the IA UK All Companies sector. For the 5 years to 28 February, the Fund is top quartile, returning 46.3%, compared to a return of 29.8% for the MSCI UK IMI TR Index and 38.7% for the average fund in the IA UK All Companies sector. Investors are currently focusing on shares with rebound and pricing potential. But some of these are already at new 12 month highs and so caution is needed. Value rotations have been sharp in recent years but typically lasting just one or two quarters. The portfolio includes some recovery shares such as Next, Restaurant Group and Wizz Air.

Trading and results

February was a mixed month for growth and value in UK equities, as concern continued on lockdowns. There were further hits to travel and hospitality, but higher expectations of inflation. During the month, there were positive contributions to performance from Wizz Air, JD Sports Fashion, Entain, LSE, Johnson Services and ASOS. Laggards were primarily the lockdown beneficiaries that performed well in 2020; including Ocado, Experian, Delivery Hero, and Games Workshop. Ceres also saw profit-taking. During the month additional or new investment was made in Restaurant Group, Whitbread, Smurfit Kappa and The Hut Group. To fund these, sales were made of the holdings in AstraZeneca and Manolete Partners, with part realisations of Kingspan and Kerry Group. In recent months the portfolio has seen bid approaches for Applegreen (agreed), Entain (rejected) and Arrow Global.

Your Fund remains fully invested, focused on resilient growing 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

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