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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.

WATCH: Our Investment Process | UK Opportunities

SVM UK Opportunities Fund

Fresh thinking never goes out of style

WATCH: Our Investment Process | UK Opportunities

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.

Fund Details

Launch Date20 March 2000
BenchmarkMSCI United Kingdom IMI Index
IA SectorUK All Companies
Type of SharesAccumulation
XD Date31 December
Pay Date30 April

Data as at 30/09/2021.

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
15
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.

Synthomer5.7
CRH4.2
Smurfit Kappa Group3.9
Alpha FMC3.3
IMI 2.4
Entain7.2
Norcros4.8
Ryanair 3.3
Tesco 3.2
Reach3.1
Prudential3.8
Lloyds Banking Group 3.5
Legal & General2.6
OSB Group1.8
Bank of Ireland0.9
Jadestone Energy4.2
Pantheon Resources2.2
Energean1.4
Longboat Energy1.4
Jersey Oil & Gas0.7
National Grid 3.7
GlaxoSmithKline2.7
DCC2.1
Smith & Nephew1.6
Creo Medical Group2.0
Team171.5
ActiveOps1.0
Micron Technology1.0
Diurnal Group0.9

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 (%)

Entain7.2
Synthomer5.7
Norcros4.8
CRH4.2
Jadestone Energy4.2
Smurfit Kappa Group3.9
Prudential3.8
National Grid 3.7
Lloyds Banking Group 3.5
Alpha FMC3.3
Rest of Portfolio55.5

Source: SVM, as at 31/08/2021

Sector Exposure (%)

Industrials22.1
Materials17.6
Consumer Discretionary17.2
Financials12.7
Energy11.1
Health Care7.9
Consumer Staples5.8
Utilities3.7
Communication Services3.5
Real Estate1.0
Information Technology0.6

Source: SVM, as at 31/08/2021

Size Analysis (%)

Large Cap40.7
Med/Mid 25028.7
Small/Small Cap30.6

Source: SVM, as at 31/08/2021

Show piebar chart

This Month's Featured Stock

Synthomer

Synthomer is a speciality polymers company. It is a global leader in the manufacture of nitrile butadiene reflex (NBR), the key raw material used in the production of nitrile rubber gloves. This industry has been in structural growth for many years, driven by increasing global hygiene standards and the substitution of traditional rubber gloves, which are not suitable for those with latex allergies. The coronavirus crisis has led to a surge in demand for rubber gloves, with some producers quoting lead times for new orders of over 6 months. With manufacturing sites running at full capacity, and limited new volume coming on-stream over the next 18 months, unit margins should remain elevated.

Commentary around Synthomer’s recent H1 21 results understandably focused on the strength in NBR, as analysts debated how quickly margins would revert to more normal levels. This overshadowed the strength demonstrated by the rest of Synthomer’s businesses. Demand for Synthomer’s products from the construction and coatings industries has rebounded strongly while the integration of Omnova has delivered the expected synergies. Cash generation has been hugely impressive, with net debt to EBITDA is less than 1x.

While we are sorry to see the existing CEO and CFO leave the business, they leave Synthomer in a far stronger position than when they joined over 6 years ago. The incoming CEO, Michael Willome, has significant chemicals industry experience and should be more than capable of continuing the good work of his predecessors. We believe that the public equity market has failed to recognise the fundamental improvements made to the Synthomer business in recent years. If it continues to do so, we would not be surprised if other interested parties were taking a much closer look.

Performance

Performance (%)

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FundIndex
1 month2.42.5
2021 YTD23.914.8
1 year49.526.6
3 years24.68.2
5 years59.429.6
Since launch*800.7158.7
Source: Lipper, as at 31/08/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges. *Fund Launch 20/03/2000.
FundIndexDifference
202146.220.3+25.9
2020-11.1-14.6+3.5
2019-8.20.5-8.7
201814.79.3+5.4
201724.317.6+6.7
Source: Lipper, as at 30/06/2021, Class B, GBP, UK net tax with net income reinvested and no initial charges.

Prices

Class A
663.20p
0.12%
Class B
764.40p
0.12%

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

Source: State Street, as at 15/10/2021.

Commentary

St Ledger’s Day is rapidly approaching. And according to the old city adage investors should have returned from their summer break in a positive mood. Yet Covid continues to dominate the headlines and even with the success of the vaccination campaign infections are rising, supply chains are faltering, and economic momentum is slowing. But despite the recent deceleration the underlying economy is strong. Consumer and corporate balance sheets are robust and there is considerable pent-up demand. The reflation trade has paused but is not over. The fund returned 2.4% versus 2.5% for the MSCI UK Index.

In a much anticipated speech to the Jackson hole gathering of central bankers, the chair of the Federal Reserve sent a strong hint that the Fed will begin tapering this year. The psychological impact of the move will be considerably greater than its mechanistic impact. Investors should focus on the positive signal that tapering sends; the economy is healing and stimulus can begin to be withdrawn. Tapering may lead to a short term increase in volatility but it will not derail the bull market. Equity markets function as a discounting mechanism and will not correct until collectively investors believe the end of the economic cycle is in sight. Many things can change the collective mindset, often with little warning, but for the moment the path of least resistant is higher.

The UK’s corporate reporting season got off to a strong start. One of the peculiarities of the UK’s corporate calendar is the mid August break with companies generally choosing either to report early in the month or wait to the beginning of September. The majority of earnings releases so far have been upbeat. Companies have been incrementally positive on the outlook, even if they have highlighted ongoing covid uncertainty. Despite August traditionally being a slow month for M&A the attractiveness of UK assets was further highlighted by further takeover approaches.

Marks & Spencer was the largest single positive contributor to performance. The company announced results that were ahead of expectations. The upside surprise was delivered in both its food and Clothing & Home activities. That this was the first upgrade to profits for a number of years highlighted the extent of the company’s problems. However, the food business retains considerable customer loyalty while clothing has now stabilised. The strength of the food proposition is being reinforced by significant investment in the estate. The JV with Ocado retains significant optionality and if the share price recovers further we would not rule out M&S attempting to buyout Ocado’s remaining stake.

Prudential Plc gained as it released well received interim results. Numbers were strong across the board with new business sales growing 21%. Post the demerger of Jackson National later this month the group will be an Asian focused insurer trading at a significant discount to its nearest peers.

Creo Medical declined as it announced an equity raise to fund expansion. The early stage of the company’s product suite makes it almost impossible to value the business accurately. However, it offers a range of products with strong IP backing that can dramatically improve patient outcomes and reduce costs. Its MicroBlate tissue ablation device has recently been used to treat patients with unresectable pancreatic tumors with very encouraging results.

A new holding was started in Smith & Nephew.

Commentary by
Neil Veitch
Global & UK Investment Director
Craig Jeruzal
UK Investment Analyst
As at 31/08/2021.

St Ledger’s Day is rapidly approaching. And according to the old city adage investors should have returned from their summer break in a positive mood. Yet Covid continues to dominate the headlines and even with the success of the vaccination campaign infections are rising, supply chains are faltering, and economic momentum is slowing. But despite the recent deceleration the underlying economy is strong. Consumer and corporate balance sheets are robust and there is considerable pent-up demand. The reflation trade has paused but is not over. The fund returned 2.4% versus 2.5% for the MSCI UK Index.

In a much anticipated speech to the Jackson hole gathering of central bankers, the chair of the Federal Reserve sent a strong hint that the Fed will begin tapering this year. The psychological impact of the move will be considerably greater than its mechanistic impact. Investors should focus on the positive signal that tapering sends; the economy is healing and stimulus can begin to be withdrawn. Tapering may lead to a short term increase in volatility but it will not derail the bull market. Equity markets function as a discounting mechanism and will not correct until collectively investors believe the end of the economic cycle is in sight. Many things can change the collective mindset, often with little warning, but for the moment the path of least resistant is higher.

The UK’s corporate reporting season got off to a strong start. One of the peculiarities of the UK’s corporate calendar is the mid August break with companies generally choosing either to report early in the month or wait to the beginning of September. The majority of earnings releases so far have been upbeat. Companies have been incrementally positive on the outlook, even if they have highlighted ongoing covid uncertainty. Despite August traditionally being a slow month for M&A the attractiveness of UK assets was further highlighted by further takeover approaches.

Marks & Spencer was the largest single positive contributor to performance. The company announced results that were ahead of expectations. The upside surprise was delivered in both its food and Clothing & Home activities. That this was the first upgrade to profits for a number of years highlighted the extent of the company’s problems. However, the food business retains considerable customer loyalty while clothing has now stabilised. The strength of the food proposition is being reinforced by significant investment in the estate. The JV with Ocado retains significant optionality and if the share price recovers further we would not rule out M&S attempting to buyout Ocado’s remaining stake.

Prudential Plc gained as it released well received interim results. Numbers were strong across the board with new business sales growing 21%. Post the demerger of Jackson National later this month the group will be an Asian focused insurer trading at a significant discount to its nearest peers.

Creo Medical declined as it announced an equity raise to fund expansion. The early stage of the company’s product suite makes it almost impossible to value the business accurately. However, it offers a range of products with strong IP backing that can dramatically improve patient outcomes and reduce costs. Its MicroBlate tissue ablation device has recently been used to treat patients with unresectable pancreatic tumors with very encouraging results.

A new holding was started in Smith & Nephew.

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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