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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 will invest at least 80% in equities and equity related instruments in UK companies. 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.

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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£193.9m

Data as at 31/05/2021.

Fund Managers

Neil Veitch
Global & UK Investment Director
15
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
16
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.

Synthomer5.8
CRH4.2
Smurfit Kappa Group3.7
Alpha FMC3.6
Balfour Beatty2.5
Entain6.4
Norcros5.0
Ryanair 2.9
Tesco 2.3
Marks & Spencer1.8
Lloyds Banking Group 4.2
Prudential3.9
Legal & General2.9
OSB Group1.7
Arden Partners0.0
Micron Technology4.2
Creo Medical Group2.4
Team171.3
ActiveOps1.0
Diurnal Group1.0
National Grid 3.9
GlaxoSmithKline2.6
DCC2.1
Roche Holdings1.9
Jadestone Energy3.8
Energean1.7
Pantheon Resources1.4
Jersey Oil & Gas0.9
Diversified Energy0.7

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

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 (%)

Entain6.4
Synthomer5.8
Norcros5.0
Micron Technology4.2
Lloyds Banking Group 4.2
CRH4.2
Prudential3.9
National Grid 3.9
Jadestone Energy3.8
Smurfit Kappa Group3.7
Rest of Portfolio54.8

Source: SVM, as at 31/05/2021

Sector Exposure (%)

Industrials23.6
Materials15.7
Consumer Discretionary14.8
Financials12.7
Energy9.9
Health Care8.5
Real Estate4.7
Consumer Staples4.0
Information Technology3.9
Utilities3.9
Communication Services1.5

Source: SVM, as at 31/05/2021

Size Analysis (%)

Large Cap43.8
Med/Mid 25028.0
Small/Small Cap28.2

Source: SVM, as at 31/05/2021

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.

While M&S’ recently released full-year results were heavily impacted by the Covid pandemic, this shouldn’t detract from the improvements made in recent years. Although the group’s Clothing & Home retail stores saw revenues decline by over 50% due to enforced closures; online sales grew by over 50%. Historically, M&S’ online business had been plagued by poorly designed websites and logistical problems. In 2021, the group managed to cope with an unprecedented increase in demand during a pandemic without any significant operational hiccoughs. Indeed, having added a number of third-party brands to its online offering, the group has emerged with a stronger platform than when it entered the pandemic. The group’s food division proved resilient during the year, despite significant exposure to both travel and hospitality channels. M&S’ joint venture with Ocado launched successfully in September and will benefit in upcoming years from increasing capacity.

M&S still faces many challenges. While the group continues to make headway in reshaping its legacy store estate, it still has some way to go in shrinking from 254 full-line stores to the targeted 180. We feel, though, that these issues are more than adequately reflected in the current stock price. With a strong Food brand that should disproportionately benefit from the reopening economy and a fast-improving Clothing & Home offering, M&S is well positioned to outperform.

Performance

Performance (%)

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FundIndex
1 month2.21.2
2021 YTD20.911.2
1 year52.121.8
3 years21.13.1
5 years59.037.2
Since launch*778.7150.7
Source: Lipper, as at 31/05/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202165.524.4+41.1
2020-24.8-19.3-5.5
2019-0.46.5-6.9
20188.01.2+6.8
201714.722.3-7.6
Source: Lipper, as at 31/03/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
653.70p
0.32%
Class B
751.60p
0.33%

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

Source: State Street, as at 14/06/2021.

Commentary

Equity markets edged higher over the month. Growth stocks generally underperformed with the technology-heavy NASDAQ index posting a negative return. Investors remain focused on the threats of a vaccine-evading variant and the potential for tighter monetary policy to short-circuit the equity bull market. Both threats receded slightly during the month with vaccinations accelerating and bond yields stabilising. The fund returned 2.2% versus 1.2% for the MSCI UK.

The Bank of England became the second major central bank to announce it was going to slow the pace of its asset purchase program. Bank officials were at pains to emphasise that the targeted stock of purchased assets would remain the same and the stance of monetary policy was unaffected. Whether this constitutes tapering, or not, is a question of semantics. Either way, the decision represents the first stage in an eventual tightening of policy. In response, GBP rallied against both USD and the Euro.

As economies recover central banks face a delicate balancing act as they withdraw stimulus. The paradox of QE is that the more successful policymakers have been in encouraging investors to purchase riskier assets, the more difficult it is to ‘normalise’ policy without a significant dislocation in markets. As Gertjan Vlieghe, an external member of the Bank of England’s Monetary Policy Committee noted, ‘What will ultimately tell us to what extent inflation pressures need a monetary policy response is the passage of time.’ Despite ongoing tension between markets and policy we feel this is more likely to be a 2022 issue for equity investors.

Alpha Financial Consulting rose as the company announced the acquisition of Lionpoint, a specialist consultant focused on the ‘alternatives’ marketplace. The deal extends AFM’s presence in the US market and elsewhere. Not only is Lionpoint a strong cultural fit, but it was acquired at an attractive multiple and offers significant revenue synergies. Despite the share’s strong recent performance, we think considerable upside remains. St Modwen jumped as the property company announced it had received a takeover approach from private equity firm, Blackstone. The group’s warehouse division is the crown jewel. The surge in online retailing is driving demand for warehouse capacity and the division has an attractive portfolio and excellent development pipeline. The housebuilding business and the group’s strategic land add complexity to the transaction, but nevertheless the bid has not been pitched at a knockout level and a counter is feasible. Lloyds gained as analysts revised their profit forecasts higher in response to the group’s positive 1Q21 update. The bank continues to benefit from the UK’s economic recovery with net interest margins resilient and a decline in loan loss provisions. M&S leapt as the retailer delivered results that were ahead of expectations and offered a positive outlook for the next twelve months.

Computer games developer, Team17, declined as growth stocks came under pressure. While the group’s recent releases haven’t quite generated the same level of interest as last year we feel they are still tracking well and the company has an attractive portfolio of assets. Pantheon declined as the recent reserve update fell short of the most optimistic expectations in the market. Investors, however, are in danger of missing the wood for the trees. Pantheon is high-risk but the rewards are significant. The company’s resource base is substantial and although questions remain over its producibility, a third-party may take a different view.

Trading activity was limited.

Commentary by
Neil Veitch
Global & UK Investment Director
Craig Jeruzal
UK Investment Analyst
As at 31/05/2021.

Equity markets edged higher over the month. Growth stocks generally underperformed with the technology-heavy NASDAQ index posting a negative return. Investors remain focused on the threats of a vaccine-evading variant and the potential for tighter monetary policy to short-circuit the equity bull market. Both threats receded slightly during the month with vaccinations accelerating and bond yields stabilising. The fund returned 2.2% versus 1.2% for the MSCI UK.

The Bank of England became the second major central bank to announce it was going to slow the pace of its asset purchase program. Bank officials were at pains to emphasise that the targeted stock of purchased assets would remain the same and the stance of monetary policy was unaffected. Whether this constitutes tapering, or not, is a question of semantics. Either way, the decision represents the first stage in an eventual tightening of policy. In response, GBP rallied against both USD and the Euro.

As economies recover central banks face a delicate balancing act as they withdraw stimulus. The paradox of QE is that the more successful policymakers have been in encouraging investors to purchase riskier assets, the more difficult it is to ‘normalise’ policy without a significant dislocation in markets. As Gertjan Vlieghe, an external member of the Bank of England’s Monetary Policy Committee noted, ‘What will ultimately tell us to what extent inflation pressures need a monetary policy response is the passage of time.’ Despite ongoing tension between markets and policy we feel this is more likely to be a 2022 issue for equity investors.

Alpha Financial Consulting rose as the company announced the acquisition of Lionpoint, a specialist consultant focused on the ‘alternatives’ marketplace. The deal extends AFM’s presence in the US market and elsewhere. Not only is Lionpoint a strong cultural fit, but it was acquired at an attractive multiple and offers significant revenue synergies. Despite the share’s strong recent performance, we think considerable upside remains. St Modwen jumped as the property company announced it had received a takeover approach from private equity firm, Blackstone. The group’s warehouse division is the crown jewel. The surge in online retailing is driving demand for warehouse capacity and the division has an attractive portfolio and excellent development pipeline. The housebuilding business and the group’s strategic land add complexity to the transaction, but nevertheless the bid has not been pitched at a knockout level and a counter is feasible. Lloyds gained as analysts revised their profit forecasts higher in response to the group’s positive 1Q21 update. The bank continues to benefit from the UK’s economic recovery with net interest margins resilient and a decline in loan loss provisions. M&S leapt as the retailer delivered results that were ahead of expectations and offered a positive outlook for the next twelve months.

Computer games developer, Team17, declined as growth stocks came under pressure. While the group’s recent releases haven’t quite generated the same level of interest as last year we feel they are still tracking well and the company has an attractive portfolio of assets. Pantheon declined as the recent reserve update fell short of the most optimistic expectations in the market. Investors, however, are in danger of missing the wood for the trees. Pantheon is high-risk but the rewards are significant. The company’s resource base is substantial and although questions remain over its producibility, a third-party may take a different view.

Trading activity was limited.

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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