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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 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.

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£159.3m

Data as at 31/05/2022.

Fund Managers

Margaret Lawson
UK Investment Director
31
Years at SVM
41
Industry Experience

Margaret joined SVM in 1990 as a founding director. Prior to co-founding SVM in 1990, Margaret was an investment manager at FS Assurance running its flagship UK fund, the FS Balanced Growth Fund. Margaret has successfully managed the SVM UK Growth Fund navigating the markets and finding growth opportunities for over 15 years. She is a recognised expert and frequent writer on domestic and global economic and market issues and is member of CFA Institute and qualified as ASIP.

Academic Qualifications:
BSc (Hons) Economics

Professional Qualifications:

ASIP

Colin McLean
Managing Director & CIO
31
Years at SVM
47
Industry Experience

Colin is the Managing Director and Chief Investment Officer at SVM. He founded SVM in 1990 following successful careers at FS Assurance, Scottish Provident and Templeton. He has helped shape global investment management and is a leading commentator and influencer on professionalism in the industry. Colin is past Chair of CFA UK and was Vice Chair of CFA Institute. He is a regular contributor to financial publications and guest on Bloomberg TV & Radio, CNBC and the BBC. 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.

Keystone Law4.0
Experian2.5
Diploma2.5
Rentokil Initial 2.0
Kingspan Group1.7
Entain3.4
JD Sports Fashion2.7
Flutter Entertainment2.1
Games Workshop1.6
AB Dynamics1.1
Kainos2.9
Oxford Instruments1.7
Softcat1.3
AVEVA1.3
Ideagen 1.1
JTC2.1
Beazley1.5
London Stock Exchange1.4
Impax Asset Management1.4
Intermediate Capital1.4
Unite Group2.7
Segro2.2
Watkin Jones1.8
Londonmetric Property1.4
Industrials REIT0.2
Dechra Pharmaceuticals3.6
Indivior0.8
Kooth0.8
Genus0.6
Instem 0.5
Gamma Communications2.5
Future1.3
Team171.3
Dianomi 0.8
4imprint Group0.3
Croda3.8
CRH1.1
Smurfit Kappa Group1.0
Cranswick2.2
Hilton Food Group1.7
Marks & Spencer0.5
Revolution Beauty0.3

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 (%)

Keystone Law4.0
Croda3.8
Dechra Pharmaceuticals3.6
Entain3.4
Kainos2.9
Unite Group2.7
JD Sports Fashion2.7
Experian2.5
Diploma2.5
Gamma Communications2.5
Rest of Portfolio69.4

Source: SVM, as at 31/05/2022

Sector Exposure (%)

Industrials31.9
Consumer Discretionary15.6
Information Technology14.5
Financials9.5
Real Estate8.3
Health Care6.7
Communication Services6.2
Materials6.0
Consumer Staples4.8

Source: SVM, as at 31/05/2022

Size Analysis (%)

Large Cap32.4
Med/Mid 25048.1
Small/Small Cap22.8

Source: SVM, as at 31/05/2022

Show piebar chart

This Month's Featured Stock

Kainos Group

Kainos provides IT services, consulting and software solutions. It has gained from the drive to cloud and resilience. It is well positioned in the public sector, and healthcare in particular, supporting digital transformation. Kainos is now capitalised at £1.6bn and has been showing strong growth in sales and profits. Recent results showed 26% organic revenue growth with bookings up 35%. The shares have bounced on the results, suggesting a beat on expectations and that the derating this year may have gone too far. Growth has been a combination of organic development and selective acquisition.

Kainos’ digital service segment supports customised online digital solutions for the UK Government and private sector organisations. The UK Government has steadily increased spending on digital transformation in recent years and is one of the leading implementers of electronic government to assist delivery of public services and enhance citizen interactions. Kainos should participate in this. For the economy as a whole, productivity is an important driver of GDP per capita growth, and a key enabler for this is software and digital services.

With a continued drive to cloud-based solutions by businesses and enhancing resilience, Kainos is likely to remain an essential partner for major transformations, such as NHS in the UK. It is one of 12 suppliers on the £800m Digital Capability for Health Framework. There is strong potential in the US where Kainos currently has a small existing presence. Kainos should expand internationally from its existing base of staff in 13 European countries. The group provides software services in Human Capital Management via its Workday practice, and this market is forecast to grow at 10% p.a.

Kainos has a strong balance sheet, good cash conversion, robust pipeline and significant backlog of contracted revenues. The management team has an excellent track record and is still founder-led. It is currently mid cap, dominant in some of the segments it services, but has potential to grow to be a large cap business.

Performance

Performance (%)

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FundIndex
1 month-3.00.9
2022 YTD-26.83.1
1 year-20.610.0
3 years0.217.0
5 years6.220.9
Since launch*260.2191.6
Source: Lipper, as at 31/05/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
2022-10.514.6-25.1
202154.624.4+30.2
2020-19.2-19.3+0.1
2019-2.26.5-8.7
201812.31.2+11.1
Source: Lipper, as at 31/03/2022, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
394.50p
-2.59%
Class B
448.80p
-2.60%

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

Source: State Street, as at 28/06/2022.

Commentary

Is there value in growth investing?

Many investors now fear there is no value in growth investing. Rotation seems driven more by sentiment than reality. Is the style only suited to economic certainty, calm markets and lower interest rates? This year almost all growth company shares have been sold-off, with a collapse in investor confidence. While value investing covers a wide range of approaches, growth investors tend to be more focused, leaving a lack of hiding places. This has been a painful period for growth investors, and particularly advisers and clients who have allocated to the style.

Studies have shown that in times of market turmoil investors tend to focus more on macroeconomic news and headlines, rather than company results. Yet in the recent reporting season many growth companies reported good growth and gave a lot of information on current trading and prospects. This was not so much trying to predict the unknowns of inflation, central bank policy and geopolitical stress, but explaining how each challenge might impact their activities and profit, and how they planned to respond. Meetings with company managements are the key to understanding real business risks, and how well a company is in control of its own destiny. Amidst the sell-off, much useful information from well managed resilient businesses has not been fully absorbed by the market.

History points to the periods after market down years usually delivering good returns. Human nature when fear prevails, means this pattern is easily overlooked. Amidst the panic of the financial crisis or at the start of the pandemic, investors found it difficult to look longer term. It seemed hard to envisage a market rebound or even a return to a ‘normal’ economy. Yet there are always growth sectors in the economy and business that prosper amidst economic downturns. These businesses will grow, generate cash, and some may even be bid for. The need for resilience, shorter supply chains, digital transformation and software automation, is driving strong growth in businesses with those specialist services. Labour market tightness works in favour of some B2B services that improve efficiency, as well as those that can help to manage talent and retain it. Stressed budgets within government and households do not stop an economy from being dynamic, creating winners and losers.

Even amidst a squeeze on incomes, consumers change tastes and behaviour. Hybrid working is now cementing some of those new patterns, disrupting city centre spending and travel. The pandemic has also left in its wake a continuing demand for companies that support health, vaccines and pets. Share prices for growth businesses have been reset, offering value to investors with a horizon beyond this year.

Performance

SVM UK Growth Fund returned -3.0% (B shares) compared with the return of 0.9% for the MSCI UK IMI TR Index and 0.1% for the average fund in the IA UK All Companies sector. For the 5 years to 31 May, the Fund returned 6.2% (B shares), compared to a return of 20.9% for the MSCI UK IMI TR Index and 16.9% for the average fund in the IA UK All Companies sector.

Trading and results

Over the month, there were positive contributions to performance from Ideagen, Flutter Entertainment, K3 Capital, Beazley and Marlowe. Negatives in the month were Croda, Segro, AB Dynamics and Kingspan. Segro is one of the UK’s largest property groups with warehouses used in retail supply chains. Online retail demand has softened. Insurer Beazley, has made a good start to the year in terms of premium rates, growth and profitability. It is benefiting from its cyber insurance offering.

Your Fund remains fully invested, including likely recovery beneficiaries and well-funded resilient growth businesses.

Commentary by
Margaret Lawson
UK Investment Director
Colin McLean
Managing Director & CIO
As at 31/05/2022.

Is there value in growth investing?

Many investors now fear there is no value in growth investing. Rotation seems driven more by sentiment than reality. Is the style only suited to economic certainty, calm markets and lower interest rates? This year almost all growth company shares have been sold-off, with a collapse in investor confidence. While value investing covers a wide range of approaches, growth investors tend to be more focused, leaving a lack of hiding places. This has been a painful period for growth investors, and particularly advisers and clients who have allocated to the style.

Studies have shown that in times of market turmoil investors tend to focus more on macroeconomic news and headlines, rather than company results. Yet in the recent reporting season many growth companies reported good growth and gave a lot of information on current trading and prospects. This was not so much trying to predict the unknowns of inflation, central bank policy and geopolitical stress, but explaining how each challenge might impact their activities and profit, and how they planned to respond. Meetings with company managements are the key to understanding real business risks, and how well a company is in control of its own destiny. Amidst the sell-off, much useful information from well managed resilient businesses has not been fully absorbed by the market.

History points to the periods after market down years usually delivering good returns. Human nature when fear prevails, means this pattern is easily overlooked. Amidst the panic of the financial crisis or at the start of the pandemic, investors found it difficult to look longer term. It seemed hard to envisage a market rebound or even a return to a ‘normal’ economy. Yet there are always growth sectors in the economy and business that prosper amidst economic downturns. These businesses will grow, generate cash, and some may even be bid for. The need for resilience, shorter supply chains, digital transformation and software automation, is driving strong growth in businesses with those specialist services. Labour market tightness works in favour of some B2B services that improve efficiency, as well as those that can help to manage talent and retain it. Stressed budgets within government and households do not stop an economy from being dynamic, creating winners and losers.

Even amidst a squeeze on incomes, consumers change tastes and behaviour. Hybrid working is now cementing some of those new patterns, disrupting city centre spending and travel. The pandemic has also left in its wake a continuing demand for companies that support health, vaccines and pets. Share prices for growth businesses have been reset, offering value to investors with a horizon beyond this year.

Performance

SVM UK Growth Fund returned -3.0% (B shares) compared with the return of 0.9% for the MSCI UK IMI TR Index and 0.1% for the average fund in the IA UK All Companies sector. For the 5 years to 31 May, the Fund returned 6.2% (B shares), compared to a return of 20.9% for the MSCI UK IMI TR Index and 16.9% for the average fund in the IA UK All Companies sector.

Trading and results

Over the month, there were positive contributions to performance from Ideagen, Flutter Entertainment, K3 Capital, Beazley and Marlowe. Negatives in the month were Croda, Segro, AB Dynamics and Kingspan. Segro is one of the UK’s largest property groups with warehouses used in retail supply chains. Online retail demand has softened. Insurer Beazley, has made a good start to the year in terms of premium rates, growth and profitability. It is benefiting from its cyber insurance offering.

Your Fund remains fully invested, including likely recovery beneficiaries and well-funded resilient growth businesses.

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 440

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