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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.

Experienced investor Neil Veitch has assumed the role of lead fund manager on the SVM UK Growth Fund as Margaret Lawson retires following 33 years of service. Please read the full press release here.

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.

Experienced investor Neil Veitch has assumed the role of lead fund manager on the SVM UK Growth Fund as Margaret Lawson retires following 33 years of service. Please read the full press release here.

Overview

Investment 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. 

Investment Policy

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.

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£54.8m

Data as at 31/10/2023.

Fund Manager

Neil Veitch
Global & UK Investment Director
17
Years at SVM
27
Industry Experience

Neil joined SVM in 2006 to manage the SVM UK Opportunities Fund. He is also lead manager of the SVM World Equity Fund and co manager of the SVM All Europe SRI Fund.

Prior to joining SVM, Neil was responsible for UK mid & small cap investments at Dutch merchant bank, Kempen Capital Management, where he also managed pan European mandates.

Academic Qualifications:
BA (Hons) Economics
MSc Investment Management

Professional Qualifications:

CFA

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.

JET24.2
IMI 3.6
Volution Group2.6
Keystone Law2.5
Ashtead Group 2.2
Flutter Entertainment5.5
Games Workshop3.0
JD Sports Fashion2.8
Greggs2.3
Whitbread2.2
London Stock Exchange4.6
JTC2.9
Beazley2.9
Alpha Group International0.9
Boku0.6
CRH3.7
Smurfit Kappa Group2.5
Glencore1.8
Diageo4.0
Cranswick2.8
Hilton Food Group1.2
Unite Group4.1
Segro3.1
GSK3.2
Indivior2.3
Creo Medical Group1.1
Gamma Communications1.7
4imprint Group1.6
Team171.3
Dianomi 0.1
Kainos1.7
Oxford Instruments1.3
FDM Group0.8
NCC Group0.4

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 (%)

Flutter Entertainment5.5
London Stock Exchange4.6
JET24.2
Unite Group4.1
Diageo4.0
CRH3.7
IMI 3.6
GSK3.2
Segro3.1
Games Workshop3.0
Rest of Portfolio61.0

Source: SVM, as at 31/10/2023

Sector Exposure (%)

Industrials27.1
Consumer Discretionary17.3
Financials11.8
Materials8.0
Consumer Staples8.0
Real Estate7.2
Health Care6.6
Communication Services4.7
Information Technology4.2

Source: SVM, as at 31/10/2023

Size Analysis (%)

Large Cap39.1
Med/Mid 25042.8
Small/Small Cap13.0

Source: SVM, as at 31/10/2023

Show piebar chart

This Month's Featured Stock

Marks and Spencer

Marks and Spencer (M&S), one of the UK’s most venerable brands, is a retailer of food and clothing. The group operates over 1,000 stores in the UK and has a mixture of owned and franchised stores in over 60 international markets.

M&S’ recently released interims results provided clear evidence of the improvements made across the business. Clothing & Home (C&H) sales increased by 6% with the group gaining market share. For the first time since 2019, M&S had a market-leading share in womenswear over the summer. This reflects the significant improvements that have been made in boosting M&S’s style perception over recent years. Full-price sales mix of over 80% reflects a reduced need for discounting and good buying discipline. Having added a number of third-party brands to its online offering and improved its own infrastructure, M&S has built a strong platform for future growth. The group’s food division had another strong period, with LFL revenue growth of 12% and grocery market share. During a period when the market saw volumes decline, M&S consistently grew volumes in each month.

M&S’ management like to describe themselves as ‘positively dissatisfied’ and indeed there are still many areas where performance can be improved. The Ocado joint venture remains loss-making and the group’s reward scheme, Sparks, is still some way short of best-in-class. Overall, though, we still think that at current levels the share price fails to reflect M&S’s qualities or its potential for improvement.

Performance

Performance (%)

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FundIndex
1 month-7.1-4.0
2023 YTD-6.30.5
1 year-1.66.1
3 years-18.342.3
5 years-12.419.6
Since launch*199.9188.7
Source: Lipper, as at 31/10/2023, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202313.513.9-0.4
2022-42.2-2.5-39.7
202133.027.6+5.4
20201.0-18.5+19.5
2019-4.22.3-6.5
Source: Lipper, as at 30/09/2023, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
389.10p
0.03%
Class B
447.40p
0.00%

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

Source: State Street, as at 01/12/2023.

Commentary

October, as is often the case, was a challenging month for equities. The prospect of higher US growth and concerns over government debt sent long-term US interest rates to 16-year highs. The surge in rates led to fears that the tightening in financial conditions would increase the downside risks to the economic outlook and increase the possibility of financial market breakdowns. The co-ordinated attacks launched by Hamas into Israel from the Gaza Strip negatively impacted sentiment further. With increased risk aversion, small and mid-cap stocks underperformed. The fund returned -7.1% versus the MSCI UK index that fell 4.0%.

The tragic events in the Middle East gave rise to concerns that additional countries would be drawn in, resulting in a wider regional conflict. It is difficult to see, though, how any of the regional powers would emerge from a broader conflict in a better position. Our base case therefore is that, like the war in Ukraine, it will eventually become more horrific background noise than something that is going to meaningfully impact financial markets. The outlook for inflation will remain the key determinant of equity market direction. Recent news flow has been encouraging. Inflationary pressures continue to ebb, and the Federal Reserve voted unanimously to leave rates unchanged at its latest meeting.

The economic outlook for 2024 has weakened and earnings in cyclical sectors may come under pressure, but financial markets are a discounting mechanism. Small and mid-cap stocks have been in a bear market since 2021 in anticipation of weaker economic growth. However, as investors begin to anticipate the turn in the interest rate cycle, and better economic times ahead, the outlook becomes much brighter. Cyclical stocks consistently return significantly more than defensives in the twelve months after a recession is declared.

With a material increase in risk aversion few holdings were in positive territory. Jet 2 declined in response to the prospect of higher oil prices. Concerns over the 2024 demand outlook continue to weigh on shares, but that is only one side of the equation. European capacity remains below 2019 levels, and we believe pricing will remain robust. Cyclical stocks were generally weak as concerns over the economic weighed.

Rentokil fell as growth in the group’s North America pest business slowed down and margins declined. Management attributed the weakness to consumer caution rather than an underlying problem with business. However, coming so soon after a large acquisition in the US the resilience of the business has been brought into question. We had reduced the position ahead of the update and lowered it further in response. The residual holding is currently under review. Croda also released a disappointing update. Its third quarter trading statement revealed that customers had continued to reduce their ingredient inventories in the consumer care, crop, and industrial end markets, due to a combination of destocking and a weaker demand environment. Again, we had significantly reduced the holding earlier in the month and sold the balance on the update.

Trading activity was higher than normal as we looked to reduce stock specific risk.

Commentary by
Neil Veitch
Global & UK Investment Director
As at 31/10/2023.

October, as is often the case, was a challenging month for equities. The prospect of higher US growth and concerns over government debt sent long-term US interest rates to 16-year highs. The surge in rates led to fears that the tightening in financial conditions would increase the downside risks to the economic outlook and increase the possibility of financial market breakdowns. The co-ordinated attacks launched by Hamas into Israel from the Gaza Strip negatively impacted sentiment further. With increased risk aversion, small and mid-cap stocks underperformed. The fund returned -7.1% versus the MSCI UK index that fell 4.0%.

The tragic events in the Middle East gave rise to concerns that additional countries would be drawn in, resulting in a wider regional conflict. It is difficult to see, though, how any of the regional powers would emerge from a broader conflict in a better position. Our base case therefore is that, like the war in Ukraine, it will eventually become more horrific background noise than something that is going to meaningfully impact financial markets. The outlook for inflation will remain the key determinant of equity market direction. Recent news flow has been encouraging. Inflationary pressures continue to ebb, and the Federal Reserve voted unanimously to leave rates unchanged at its latest meeting.

The economic outlook for 2024 has weakened and earnings in cyclical sectors may come under pressure, but financial markets are a discounting mechanism. Small and mid-cap stocks have been in a bear market since 2021 in anticipation of weaker economic growth. However, as investors begin to anticipate the turn in the interest rate cycle, and better economic times ahead, the outlook becomes much brighter. Cyclical stocks consistently return significantly more than defensives in the twelve months after a recession is declared.

With a material increase in risk aversion few holdings were in positive territory. Jet 2 declined in response to the prospect of higher oil prices. Concerns over the 2024 demand outlook continue to weigh on shares, but that is only one side of the equation. European capacity remains below 2019 levels, and we believe pricing will remain robust. Cyclical stocks were generally weak as concerns over the economic weighed.

Rentokil fell as growth in the group’s North America pest business slowed down and margins declined. Management attributed the weakness to consumer caution rather than an underlying problem with business. However, coming so soon after a large acquisition in the US the resilience of the business has been brought into question. We had reduced the position ahead of the update and lowered it further in response. The residual holding is currently under review. Croda also released a disappointing update. Its third quarter trading statement revealed that customers had continued to reduce their ingredient inventories in the consumer care, crop, and industrial end markets, due to a combination of destocking and a weaker demand environment. Again, we had significantly reduced the holding earlier in the month and sold the balance on the update.

Trading activity was higher than normal as we looked to reduce stock specific risk.

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.

Dealing - Funds
0345 066 1110

Professional Adviser Helpline
0800 0199 110

Literature Requests
0800 0199 110

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