Menu

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£177.8m

Data as at 31/12/2020.

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.

Ocado4.0
JD Sports Fashion3.6
Wizz Air 2.9
Flutter Entertainment2.9
JET21.9
AB Dynamics2.9
Experian2.9
Keystone Law2.7
Rentokil Initial 2.4
Johnson Service Group2.1
London Stock Exchange2.6
Intermediate Capital2.3
Unite Group2.2
Beazley2.0
Segro1.7
Games Workshop2.9
Cranswick2.3
Team171.8
Hilton Food Group1.5
Kerry Group1.4
Ceres Power5.4
ITM Power2.1
Kainos2.5
AVEVA1.4
Softcat1.2
First Derivatives0.6
Blue Prism0.5
Dechra Pharmaceuticals3.1
AstraZeneca 0.8
Hikma Pharmaceuticals0.8
Kooth0.5
Indivior0.2
Croda3.5
Gamma Communications3.1

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 Power5.4
Ocado4.0
JD Sports Fashion3.6
Croda3.5
Gamma Communications3.1
Dechra Pharmaceuticals3.1
AB Dynamics2.9
Games Workshop2.9
Experian2.9
Wizz Air 2.9
Rest of Portfolio65.8

Source: SVM, as at 31/12/2020

Sector Exposure (%)

Consumer Services28.8
Industrials26.7
Financials16.2
Consumer Goods12.4
Oil & Gas7.5
Technology6.8
Health Care5.5
Basic Materials3.5
Telecommunications3.1

Source: SVM, as at 31/12/2020

Size Analysis (%)

Large Cap44.7
Med/Mid 25048.8
Small/Small Cap17.0

Source: SVM, as at 31/12/2020

Show piebar chart

This Month's Featured Stock

Next PLC

Next is a UK High Street retailer with a growing e-commerce business. It has more than 500 stores in the UK and Ireland, and franchises 200 stores in more than 30 countries in Asia, Europe and the Middle East. The group is carefully navigating its shift to grow online sales, making use of its catalogue and mail order heritage. It is gradually reducing its physical retail footprint as it builds online sales; integrating the two to assist returns and click & collect. Next has potential to evolve to become a platform for other retailers.

Next appears misunderstood as a legacy High Street retailer. As a business in transition, it appears misunderstood by many investors. However, it could be a survivor in a troubled sector; cash generative and capable of pivoting towards a blend of physical retail and online e-commerce business. Management is highly regarded and Next has coped with the challenge of the pandemic - illustrating its resilience.

Next’s heritage in catalogues gives it experience and credibility online. 50% of its online business is now click and collect, showing the value of an integrated model using the High Street property. Returns are a big cost issue in online retail, particularly in clothing and fashion. Next is developing as a service platform for third party retailers yet is more lowly rated than others in this area such as The Hut Group. Undoubtedly, Next still lacks the image of some newer online businesses, but it has the ability to continue to rationalise its High Street estate and build up online. It is an example of a share that combines attributes of value and growth.

Performance

Performance (%)

{{#if periods.length }}
{{/if }}
{{#each series }}
{{ displayName }}
{{ endValue }}
{{/each }}
FundIndex
1 month8.03.7
2020 YTD7.0-11.7
1 year7.0-11.7
3 years14.8-5.6
5 years39.125.5
Since launch*336.0125.4
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
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
556.20p
1.44%
Class B
626.00p
1.46%

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

Source: State Street, as at 15/01/2021.

Commentary

In January, investors often look for new themes – giving the calendar more respect than it deserves. But for UK investors, the new year marks a change in Britain’s trading relationships and potential for a fresh perspective from international investors. UK shares have been hit by uncertainty and what many saw as a messy withdrawal from the EU. Relative to other major markets, British shares have lagged materially. Will 2021 bring a catch up?

Adding to the sell-off by international investors, UK wealth managers have typically rebalanced to cut UK exposure. For many that proved a good call, though stock selection could have driven a better than index result in UK equities and much worse in the US if the big tech FAANG stocks were missed. But now, with potential for further Sterling recovery combined with the risk of further US Dollar weakness, domestic assets might begin to look attractive again. Corporate buyers could be the first to move in on the opportunity.

The UK has tended to be open for change of control – in many other countries, hostile takeovers face more barriers. Cheap money is readily available to listed companies and private equity, and could drive more takeovers. UK listed with global exposure could be a target. There may be break-up opportunity for groups that are growing in the US or Europe but are held back because of their London listing and predominately UK share register. Already there have been bids for William Hill, Entain (formerly GVC) and Applegreen. These highlight the value of overseas assets.

The UK also has higher exposure to mining and resource businesses than some other markets, potentially benefiting from inflation and Dollar weakness. If stockmarket institutional buyers are slow to return to UK equities, corporate buyers might move first. And the UK may see some strongly growing private businesses come to market this year. Time will tell whether Brexit works for the UK, but it has historically been a more international and dynamic economy and it seems overlooked by many investors.

Performance

In December, SVM UK Growth Fund gained 8.0%, compared to a return of 3.7% for the MSCI UK IMI TR Index and 4.5% for the average fund in the IA UK All Companies sector. For calendar 2020, the Fund gained 7.0% compared to a return of minus 11.7% for the MSCI UK IMI TR Index and minus 6.0% for the average fund in the IA UK All Companies sector. For the 5 years to 31 December, the Fund is top quartile, returning 39.1%, compared to a return of 25.5% for the MSCI UK IMI TR Index and 30.7% for the average fund in the IA UK All Companies sector.

Trading and results

December was a growth oriented month in UK equities, as concern returned about lockdowns. During the month, there were positive contributions to performance from Ceres Power, Applegreen, AB Dynamics, ITM Power, JD Sports Fashion and Games Workshop. Applegreen, with its more recent investments in the US and potential for deploying further capital, looked in hindsight as an ideal candidate for a private equity buyer. Laggards included Kingspan, Avon Rubber and GlobalData, all of which are retained.

During the month additional investment was made in XP Power and Aveva, which has lagged as it bought US data management firm OSIsoft. The takeover offers synergies on costs and cross-selling. Aveva should benefit if IT spending by industrial clients grows. To fund these, profit was taken on part of the holdings in Applegreen and AB Dynamics.

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

Commentary by
Margaret Lawson
UK Investment Director
Colin McLean
Managing Director & CIO
As at 31/12/2020.

In January, investors often look for new themes – giving the calendar more respect than it deserves. But for UK investors, the new year marks a change in Britain’s trading relationships and potential for a fresh perspective from international investors. UK shares have been hit by uncertainty and what many saw as a messy withdrawal from the EU. Relative to other major markets, British shares have lagged materially. Will 2021 bring a catch up?

Adding to the sell-off by international investors, UK wealth managers have typically rebalanced to cut UK exposure. For many that proved a good call, though stock selection could have driven a better than index result in UK equities and much worse in the US if the big tech FAANG stocks were missed. But now, with potential for further Sterling recovery combined with the risk of further US Dollar weakness, domestic assets might begin to look attractive again. Corporate buyers could be the first to move in on the opportunity.

The UK has tended to be open for change of control – in many other countries, hostile takeovers face more barriers. Cheap money is readily available to listed companies and private equity, and could drive more takeovers. UK listed with global exposure could be a target. There may be break-up opportunity for groups that are growing in the US or Europe but are held back because of their London listing and predominately UK share register. Already there have been bids for William Hill, Entain (formerly GVC) and Applegreen. These highlight the value of overseas assets.

The UK also has higher exposure to mining and resource businesses than some other markets, potentially benefiting from inflation and Dollar weakness. If stockmarket institutional buyers are slow to return to UK equities, corporate buyers might move first. And the UK may see some strongly growing private businesses come to market this year. Time will tell whether Brexit works for the UK, but it has historically been a more international and dynamic economy and it seems overlooked by many investors.

Performance

In December, SVM UK Growth Fund gained 8.0%, compared to a return of 3.7% for the MSCI UK IMI TR Index and 4.5% for the average fund in the IA UK All Companies sector. For calendar 2020, the Fund gained 7.0% compared to a return of minus 11.7% for the MSCI UK IMI TR Index and minus 6.0% for the average fund in the IA UK All Companies sector. For the 5 years to 31 December, the Fund is top quartile, returning 39.1%, compared to a return of 25.5% for the MSCI UK IMI TR Index and 30.7% for the average fund in the IA UK All Companies sector.

Trading and results

December was a growth oriented month in UK equities, as concern returned about lockdowns. During the month, there were positive contributions to performance from Ceres Power, Applegreen, AB Dynamics, ITM Power, JD Sports Fashion and Games Workshop. Applegreen, with its more recent investments in the US and potential for deploying further capital, looked in hindsight as an ideal candidate for a private equity buyer. Laggards included Kingspan, Avon Rubber and GlobalData, all of which are retained.

During the month additional investment was made in XP Power and Aveva, which has lagged as it bought US data management firm OSIsoft. The takeover offers synergies on costs and cross-selling. Aveva should benefit if IT spending by industrial clients grows. To fund these, profit was taken on part of the holdings in Applegreen and AB Dynamics.

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

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