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 Date | 20 March 2000 |
| Benchmark | MSCI United Kingdom IMI Index |
| IA Sector | UK All Companies |
| Type of Shares | Accumulation |
| XD Date | 31 December |
| Pay Date | 30 April |
| Fund Size | £179.9m |
Data as at 31/03/2021.
Fund Managers
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.
Professional Qualifications:
ASIP
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.
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.
| Ceres Power | 5.1 |
| Keystone Law | 3.3 |
| Wizz Air | 3.0 |
| Experian | 2.6 |
| Rentokil Initial | 2.2 |
| JD Sports Fashion | 3.4 |
| Ocado | 3.3 |
| Flutter Entertainment | 2.9 |
| Entain | 2.8 |
| AB Dynamics | 2.6 |
| Kainos | 3.0 |
| AVEVA | 1.7 |
| Softcat | 1.5 |
| Renishaw | 1.4 |
| Boku | 1.3 |
| Intermediate Capital | 2.4 |
| London Stock Exchange | 1.9 |
| Beazley | 1.9 |
| Impax Asset Management | 1.2 |
| Draper Esprit | 1.0 |
| Gamma Communications | 3.0 |
| Team17 | 1.8 |
| Future | 1.1 |
| 4imprint Group | 0.2 |
| Frontier Developments | 0.2 |
| Unite Group | 2.2 |
| Segro | 1.6 |
| Watkin Jones | 1.4 |
| Londonmetric Property | 1.0 |
| Cranswick | 2.3 |
| Hilton Food Group | 1.4 |
| Kerry Group | 1.0 |
| Fevertree Drinks | 0.6 |
| Premier Foods | 0.3 |
| Croda | 3.3 |
| Smurfit Kappa Group | 1.0 |
| Dechra Pharmaceuticals | 3.0 |
| Kooth | 0.6 |
| Indivior | 0.2 |
| Genus | 0.1 |
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 (%)
Source: SVM, as at 31/03/2021
Sector Exposure (%)
Source: SVM, as at 31/03/2021
Size Analysis (%)
Source: SVM, as at 31/03/2021
This Month's Featured Stock
Unite Group
Unite is the UK’s largest owner, operator and developer of purpose-built student accommodation. It owns and rents accommodation to 76,000 students in more than 25 leading university towns and cities, with one-third of its portfolio in London. Unite manufactures the modular bedroom units off site and installs some in refurbished buildings. The company also operates two specialist funds and joint ventures with institutional investment partners, totalling £4 billion of assets. About 85% of total revenue is rental income, with the remainder being management and performance fees.
In 2020, Unite maintained a satisfactory operating performance in a very challenging environment; aiming for a return to rental growth and near-full occupancy in 2021/22. Easing of lockdown measures should bring a gradual return of students. Current reservation levels for 2021/22 are 66%, slightly behind last year’s 77%. Although more focused on domestic students, the company is seeing good demand from higher-paying overseas markets such as China and India.
The development pipeline covers almost 4,000 beds over the next four years costing £600m, expected to yield 6.4%. Disposals will help the group to meet this development spend whilst keeping to borrowing covenants on loan to value. Unite’s shares are at a premium to net asset value, but it is likely that investors will focus on rental growth and development, and value the group on earnings prospects. Unite has partnerships with the strongest UK universities, including many Russell Group leading ones, where there is high student demand. It has a best-in-class portfolio and is positioned for long-term structural growth from its strong capital structure.
Performance
Performance (%)
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Prices
SVM funds are priced every working day at 12 noon UK time and prices are updated here shortly afterwards.
Source: State Street, as at 22/04/2021.
Literature
If you would like a copy of any historic factsheets please email info@svmonline.co.uk
- 2020
- 2019
- 2018
- 2017
- 2016
- 2015
- 2014
- 2013
- 2012
- 2011
- 2010
- 2009
- 2008
- 2007
Insights
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
Commentary
For a UK economy with a record of low growth, a little overheating may be welcomed. Officially, the Bank of England and other central banks agree on stimulus and seem to be unworried by inflation. But the stimulation is in unchartered territory; inflation is likely to surprise on the upside. This is alongside an expectation of sharp upturn in industrial sector earnings that should persist for at least two or three years. Pointing to this, inventory and capital spend hit lows in the second half of 2020, a position that often leads to industrial recovery. We can expect more signs of overheating to emerge, and signs of supply disruption in a range of sectors. Companies with pricing power will be able to pay up for their inputs and raise wages.
Differing responses to the pandemic around the world are beginning to create political tensions. Maybe not yet a new world order, but regional power has shifted. China has gained influence and is more in control of its own destiny: the US less so. The next phase of China’s development may not be export-led but instead focus on boosting domestic demand. A rise in global food prices could be the result, exporting inflation that will feed into wages in the West.
Adding to soft commodity pressures, the shift towards electric vehicles and renewables are likely to bring a structural increase in demand for copper and some other commodities. The move from conventional power generation will bring a step-change in copper intensity.
US stimulus is experimental, not only in terms of the level of stimulus but the degree of control on bond prices that is being attempted. The US Federal Reserve may no longer have the authority to dictate to global investors in this way. Buyers of US debt could decide to impose more financial discipline. Huge global stimulus should boost company profits over the next two years, but it could bring more volatility in currencies and interest rates. In this recovery, the focus within industrials should be on businesses with the potential for earnings quality to be recognised and re-rated as profit growth comes through.
Performance
In March, SVM UK Growth Fund returned 2.9% compared with the return of 4.0% for the MSCI UK IMI TR Index and 3.8% for the average fund in the IA UK All Companies sector. For the 5 years to 31 March, the Fund is top quartile, returning 49.5%, compared to a return of 32.4% for the MSCI UK IMI TR Index and 40.7% for the average fund in the IA UK All Companies sector. The market pattern favours value, but gross businesses with good results all being recognised. A number of businesses such as retailer, Next and student accommodation provider Unite, have both value and growth characteristics; with strong recovery potential but also growth strategies that should win market share in their sectors.
Trading and results
March saw some portfolio stocks react well to good trading updates. Softcat, in particular surprised the market with strong earnings growth for the 6 months to end of January, and its shares jumped as analysts upgraded. There were also good contributions to performance from Kainos, Flutter, Kingspan and Gamma Communications. The 3rd wave of the pandemic in Europe and slower than expected easing of lockdown restrictions restrained airlines; Wizz Air and Jet2 were negatives for the month. Also lagging were Ocado, XP Power and LSE. We believe XP Power is well placed for industrial recovery, with potential for its rating to catch-up with peers.
Your Fund remains fully invested, including likely recovery beneficiaries and strong growth businesses.
For a UK economy with a record of low growth, a little overheating may be welcomed. Officially, the Bank of England and other central banks agree on stimulus and seem to be unworried by inflation. But the stimulation is in unchartered territory; inflation is likely to surprise on the upside. This is alongside an expectation of sharp upturn in industrial sector earnings that should persist for at least two or three years. Pointing to this, inventory and capital spend hit lows in the second half of 2020, a position that often leads to industrial recovery. We can expect more signs of overheating to emerge, and signs of supply disruption in a range of sectors. Companies with pricing power will be able to pay up for their inputs and raise wages.
Differing responses to the pandemic around the world are beginning to create political tensions. Maybe not yet a new world order, but regional power has shifted. China has gained influence and is more in control of its own destiny: the US less so. The next phase of China’s development may not be export-led but instead focus on boosting domestic demand. A rise in global food prices could be the result, exporting inflation that will feed into wages in the West.
Adding to soft commodity pressures, the shift towards electric vehicles and renewables are likely to bring a structural increase in demand for copper and some other commodities. The move from conventional power generation will bring a step-change in copper intensity.
US stimulus is experimental, not only in terms of the level of stimulus but the degree of control on bond prices that is being attempted. The US Federal Reserve may no longer have the authority to dictate to global investors in this way. Buyers of US debt could decide to impose more financial discipline. Huge global stimulus should boost company profits over the next two years, but it could bring more volatility in currencies and interest rates. In this recovery, the focus within industrials should be on businesses with the potential for earnings quality to be recognised and re-rated as profit growth comes through.
Performance
In March, SVM UK Growth Fund returned 2.9% compared with the return of 4.0% for the MSCI UK IMI TR Index and 3.8% for the average fund in the IA UK All Companies sector. For the 5 years to 31 March, the Fund is top quartile, returning 49.5%, compared to a return of 32.4% for the MSCI UK IMI TR Index and 40.7% for the average fund in the IA UK All Companies sector. The market pattern favours value, but gross businesses with good results all being recognised. A number of businesses such as retailer, Next and student accommodation provider Unite, have both value and growth characteristics; with strong recovery potential but also growth strategies that should win market share in their sectors.
Trading and results
March saw some portfolio stocks react well to good trading updates. Softcat, in particular surprised the market with strong earnings growth for the 6 months to end of January, and its shares jumped as analysts upgraded. There were also good contributions to performance from Kainos, Flutter, Kingspan and Gamma Communications. The 3rd wave of the pandemic in Europe and slower than expected easing of lockdown restrictions restrained airlines; Wizz Air and Jet2 were negatives for the month. Also lagging were Ocado, XP Power and LSE. We believe XP Power is well placed for industrial recovery, with potential for its rating to catch-up with peers.
Your Fund remains fully invested, including likely recovery beneficiaries and strong growth businesses.
Independent thinking
Monthly analysis and insights from our fund managers