Menu

SVM UK Opportunities Fund

SVM UK Opportunities Fund

Fresh thinking never goes out of style

The Fund, led by Neil Veitch, looks to achieve positive returns by identifying and investing in organisations with sound business models where he believes the current market valuation offers an opportunity. The Fund can invest in businesses of any size.

SVM UK Opportunities Fund

Fresh thinking never goes out of style

The Fund, led by Neil Veitch, looks to achieve positive returns by identifying and investing in organisations with sound business models where he believes the current market valuation offers an opportunity. The Fund can invest in businesses of any size.

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 whose future growth is not reflected in current market expectations. The Fund may invest in other permitted securities.

Approach

We believe the basis of successful investing is simple. We aim to find good businesses that we can buy at an attractive price.

But it’s important how we define and identify those characteristics in detail. We don’t see value and growth as two different measures or types of investment; and we don’t measure them on the basis of current earnings and share prices.

Rather than value or growth, we invest on the basis of the value of growth. We want to find strong companies for your portfolio whose future growth is not reflected in current market expectations. We believe these companies have an attractive positive bias in their risk-reward profile which makes them potentially rewarding investments in your portfolio.

Investing in this fund, you will be buying a concentrated portfolio of companies of any size with strong, undervalued long-term prospects. You can invest with confidence in our ability to find these companies, based on our long history of comprehensive UK company analysis and financial modelling, and our understanding of what’s changing in companies and their industries.

Upcoming Webinar

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£151.7m

Data as at 31/12/2020.

Fund Managers

Neil Veitch
Global & UK Investment Director
14
Years at SVM
24
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

Craig Jeruzal
UK Investment Analyst
14
Years at SVM
15
Industry Experience

Craig joined SVM in 2006 and is responsible for SVM's SRI and Corporate Governance analysis. Craig also assists the portfolio managers in equity research.

Academic Qualifications:
MA (Hons) Politics

Professional Qualifications:

CFA

Portfolio

Risk Baskets

To help understand the overall balance of the portfolio, stocks are allocated to one of eight risk groups: defensive, cyclical, stable financial, unstable financial, consumer cyclical, oil & gas, mining and finally technology. Most of these groups are self explanatory but financials deserve some clarity. All financials are inherently unstable, but in the main, Lloyd’s underwriters and General Insurers take less balance sheet risk, so are relatively more stable than Banks or Life Assurers.

Seeing the portfolio broken down into these categories allows an understanding of how aggressive or defensive the overall portfolio is, and where risk is being taken.

Synthomer4.0
Smurfit Kappa Group3.9
RWS Holdings3.3
CRH3.2
Balfour Beatty2.7
Entain4.9
Norcros4.0
Tesco 3.9
Ryanair 3.7
Vistry Group1.9
Prudential4.2
Legal & General3.4
Lloyds Banking Group 3.3
OSB Group2.0
Arden Partners0.1
Jadestone Energy3.9
Pantheon Resources3.1
Energean1.8
BP1.1
Savannah Energy0.6
DCC3.0
National Grid 2.9
Roche Holdings2.5
GlaxoSmithKline2.4
AstraZeneca 1.0
Creo Medical Group2.7
Team172.0
Koninklijke Philips1.7
Bytes Technology Group0.7

There are no holdings in this category

There are no holdings in this category

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 or sector. As a consequence the SVM UK Opportunities Fund portfolio will vary considerably from the benchmark index and from other funds that are in the same IA sector.

Top 10 Holdings (%)

Entain4.9
Prudential4.2
Synthomer4.0
Norcros4.0
Tesco 3.9
Jadestone Energy3.9
Smurfit Kappa Group3.9
Ryanair 3.7
Legal & General3.4
Lloyds Banking Group 3.3
Rest of Portfolio60.8

Source: SVM, as at 31/12/2020

Sector Exposure (%)

Industrials35.0
Consumer Services15.1
Financials15.0
Oil & Gas11.6
Health Care10.3
Consumer Goods6.2
Basic Materials4.0
Utilities2.9
Technology0.7

Source: SVM, as at 31/12/2020

Size Analysis (%)

Large Cap41.2
Med/Mid 25034.9
Small/Small Cap23.9

Source: SVM, as at 31/12/2020

Show piebar chart

This Month's Featured Stock

IMI

IMI specialises in the engineering and manufacturing of fluid control components. The group produces a wide range of valves, actuators, and controls for a diverse set of industries including healthcare, transportation, and industrial automation.

For much of the last decade, IMI appeared to be stuck in a rut. Organic growth slowed and operating profit margins, while still respectably in the mid-teens, had fallen from previous peaks. The business appeared to have become inward-looking, focused on a series of internal restructuring measures with little to excite investors in terms of innovation. Over the past 18 months, though, it appears that IMI has rediscovered some of that long-lost mojo.

A lot of the credit for this change should go to CEO, Roy Twite, who shortly after his appointment in 2019 simplified IMI’s operational structure. The group is now focused on those areas which offer the fastest growth and where it can differentiate itself through either product differentiation or superior customer service. While COVID has distorted 2020’s results, with disruption in some end markets offset by a surge in demand for ventilator components, IMI has shown an encouraging resilience in both revenues and earnings throughout the year.

Currently trading on an estimated 2021 PE of less than 16x, IMI trades at a discount to peers. We believe the group is well-positioned over upcoming years to deliver organic growth ahead of consensus expectations and return margins to previous peak levels and potentially beyond. With a strong balance sheet, IMI also has the option to conduct returns – enhancing M&A activity.

Performance

Performance (%)

{{#if periods.length }}
{{/if }}
{{#each series }}
{{ displayName }}
{{ endValue }}
{{/each }}
FundIndex
1 month4.73.7
2020 YTD-8.1-11.7
1 year-8.1-11.7
3 years6.6-5.6
5 years32.625.5
Since launch*626.7125.4
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
2020-8.1-11.7+3.6
201931.418.5+12.9
2018-11.7-9.7-2.0
201714.613.1+1.5
20168.617.5-8.9
Source: Lipper, as at 31/12/2020, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
565.70p
0.66%
Class B
648.50p
0.67%

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

Source: State Street, as at 22/01/2021.

Commentary

The UK equity market made further gains during December. UK assets were caught in the crosscurrents of the discovery of a new, more transmissible, Covid-19 variant and the announcement of a Brexit trade deal. Despite an impressive rally from the March low, the index still finished the year in negative territory. For the month the fund returned 4.7% versus the MSCI UK Index that returned 3.7%.

UK equities enjoyed a positive start to December as investors anticipated the introduction of mass vaccinations. However, the discovery of a number of new Covid variants and the likelihood of further lockdowns led to a pullback. Markets regained their poise as the UK and the EU finally agreed a trade deal. GBP and stocks exposed to the domestic economy rallied as the tail-risk of a no-deal Brexit was removed. The agreement is centred on traded goods and excludes the UK’s service sector. The performance of banks and life assurers was more muted as concerns grew over the future access of the UK’s hugely important financial services sector to European markets.

The conclusion of the Brexit deal highlights the significant constraints policymakers operate under. Despite bellicose rhetoric, politicians have a strong tendency to follow the path of least resistance. This is not to say that significant policy errors cannot occur, but that they happen less frequently than many a shrill commentary suggests.

Outside of the UK many countries tightened Covid restrictions further. We continue to believe that markets will largely look through their short-term economic impact and focus on the potential for a significant recovery in the second half of the year. One of the biggest uncertainties as vaccines become available, and life begins to return to normal, will be the attitude of consumers and businesses towards savings and investment. The household savings rate has risen substantially during the pandemic and while this will come down the quantum and timing is unclear. Perhaps we are merely projecting our own biases, but we feel it is unlikely that households will dramatically increase their level of precautionary savings in a post-pandemic world. The recent significant rise in M&A activity certainly suggests corporates see little need to save for a rainy day.

There were many large positive contributors to performance over the month. Prudential Plc rose as investors looked for reflation plays. The ‘Pru’ has been a notable underperformer relative to its nearest peer, AIA, over the last twelve months and with Brexit out of the way we think there is scope for this to reverse. Entain (formerly GVC) gained as the company continued to highlight the progress it was making in the US market. After something of a slow start, recent data suggests that the company is taking greater share in those states that have recently opened up. DRAM manufacturer, Micron, jumped as memory pricing continued to improve. John Menzies rose as the outlook for the aviation sector improved. The shares were buoyed further by the announcement from Signature Aviation that it had received multiple takeover approaches.

The largest detractor to performance was distributor, DCC. The shares recent underperformance was sustained as investors remained concerned over its energy transmission strategy. We believe these concerns are significantly misplaced and the stock has compelling value on a FCF yield of 8% and with its robust balance sheet.

The holdings in Associated British Foods and Micron were exited.

Commentary by
Neil Veitch
Global & UK Investment Director
Craig Jeruzal
UK Investment Analyst
As at 31/12/2020.

The UK equity market made further gains during December. UK assets were caught in the crosscurrents of the discovery of a new, more transmissible, Covid-19 variant and the announcement of a Brexit trade deal. Despite an impressive rally from the March low, the index still finished the year in negative territory. For the month the fund returned 4.7% versus the MSCI UK Index that returned 3.7%.

UK equities enjoyed a positive start to December as investors anticipated the introduction of mass vaccinations. However, the discovery of a number of new Covid variants and the likelihood of further lockdowns led to a pullback. Markets regained their poise as the UK and the EU finally agreed a trade deal. GBP and stocks exposed to the domestic economy rallied as the tail-risk of a no-deal Brexit was removed. The agreement is centred on traded goods and excludes the UK’s service sector. The performance of banks and life assurers was more muted as concerns grew over the future access of the UK’s hugely important financial services sector to European markets.

The conclusion of the Brexit deal highlights the significant constraints policymakers operate under. Despite bellicose rhetoric, politicians have a strong tendency to follow the path of least resistance. This is not to say that significant policy errors cannot occur, but that they happen less frequently than many a shrill commentary suggests.

Outside of the UK many countries tightened Covid restrictions further. We continue to believe that markets will largely look through their short-term economic impact and focus on the potential for a significant recovery in the second half of the year. One of the biggest uncertainties as vaccines become available, and life begins to return to normal, will be the attitude of consumers and businesses towards savings and investment. The household savings rate has risen substantially during the pandemic and while this will come down the quantum and timing is unclear. Perhaps we are merely projecting our own biases, but we feel it is unlikely that households will dramatically increase their level of precautionary savings in a post-pandemic world. The recent significant rise in M&A activity certainly suggests corporates see little need to save for a rainy day.

There were many large positive contributors to performance over the month. Prudential Plc rose as investors looked for reflation plays. The ‘Pru’ has been a notable underperformer relative to its nearest peer, AIA, over the last twelve months and with Brexit out of the way we think there is scope for this to reverse. Entain (formerly GVC) gained as the company continued to highlight the progress it was making in the US market. After something of a slow start, recent data suggests that the company is taking greater share in those states that have recently opened up. DRAM manufacturer, Micron, jumped as memory pricing continued to improve. John Menzies rose as the outlook for the aviation sector improved. The shares were buoyed further by the announcement from Signature Aviation that it had received multiple takeover approaches.

The largest detractor to performance was distributor, DCC. The shares recent underperformance was sustained as investors remained concerned over its energy transmission strategy. We believe these concerns are significantly misplaced and the stock has compelling value on a FCF yield of 8% and with its robust balance sheet.

The holdings in Associated British Foods and Micron were exited.

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
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