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magazineThe UK funds and trusts which have soared after the general election
Sentiment towards UK stocks has dramatically improved since the December general election vote result, as evidenced by widespread gains among UK-focused funds and investment trusts.
FE Fundinfo data mined by Shares shows the most obvious open-ended fund beneficiaries of the ‘Boris Bounce’ from across the IA UK Equity Income, IA UK All Companies and IA UK Smaller Companies sectors have been the constituents of the latter cohort.
Bestriding the performance leader board like a colossus is a fund that may not be familiar to our readers, namely VT Teviot UK Smaller Companies (BF6X212), up 10.2% on a total return basis in the weeks since polling day. Managed by Scotland-based Valu-Trac, this diversified portfolio puts money to work with companies that reside in the bottom 10% of the UK market by market value.
Our research highlights positive total returns have been generated by a slew of other dedicated small cap funds, among them M&G Smaller Companies (B75DFL8) and JPM UK Smaller Companies (3183500), while another flourishing fund is Premier UK Growth (3163922).
At last count, the Premier fund’s biggest positions include Jet2 airline owner Dart (DTG:AIM), online fashion seller Boohoo (BOO:AIM) and German property investor Sirius Real Estate (SRE). It also has a stake in cash-rich Redrow (RDW), part of the housebuilding sector where investors have started to debate the potential for improved prospects amid more clarity on Brexit.
ROARING AHEAD
One fund that has enjoyed an 8.8% post-polls gain is Liontrust UK Opportunities (B8L76S5), a concentrated book of 30 holdings. Formerly Neptune UK Opportunities, this collective enables investors to access the small and mid-cap acumen of Mark Martin, who also manages Liontrust UK Mid Cap (B909H08).
Liontrust UK Opportunities’ top 10 holdings include British engineer Bodycote (BOY), chemicals giant Elementis (ELM) and Consort Medical (CSRT), a contract development and manufacturing firm in the process of being taken over by Swedish outfit Recipharm.
DOMESTIC TRUSTS IN DEMAND
Many domestically-focused investment trusts had languished on stubbornly wide discounts to net asset values ahead of the general election. That situation is now changing with many of them rallying strongly in recent weeks, delivering tasty returns for investors as well as closing the aforementioned NAV discounts.
Shareholders in trusts including the Harry Nimmo-managed Standard Life UK Smaller Companies (SLS), the Neil Hermon-steered Henderson Smaller Companies (HSL), Montanaro UK Smaller Companies (MTU) and Downing Strategic Micro-Cap (DSM) have all benefited as the shares in these vehicles have shot higher as a result of investors bidding up UK stocks.
The top UK-focused investment trust performer since 12 December is JPMorgan Smaller Companies (JMI) with an 18.5% total return. Managers Georgina Brittain and Katen Patel seek to own companies with a competitive edge, frequently operating in niche growth markets, which rather than being dependent on GDP, are forging their own growth. Porfolio holdings include fantasy miniatures maker Games Workshop (GAW), specialist media group Future (FUTR) and the scientific instruments maker Judges Scientific (JDG:AIM).
Hot on its heels since the election with a 16.2% gain is Schroder UK Mid Cap (SCP), with sentiment turning positive as the FTSE 250 index is perceived as a proxy for the UK’s domestic economy.
Managed by Andrew Brough and Jean Roche, this trust aims to provide a total return in excess of the FTSE 250 index and is invested in the likes of alternative asset manager Intermediate Capital (ICP), home repairs play HomeServe (HSV) and homewares market leader Dunelm (DNLM).
Another notable gainer since Boris Johnson bagged his comfortable working majority is the SVM UK Emerging Fund (SVM), a growth companies investor managed by Margaret Lawson and Colin McLean with a sectoral bias towards consumer services, financials and industrials.
EVEN INCOME FUNDS HAVE RALLIED
Income funds have been in vogue as well as value and growth-focused collectives. For example, Chelverton UK Dividend Trust (SDV) has been a strong performer on the market since the general election. This closed-ended fund had previously endured a prolonged period of poor sentiment towards the small cap dividend payers, regarded as ‘value’ stocks, in which it invests.
Managers David Horner and David Taylor say the election result should for the first time since the Brexit referendum enable the companies in the fund’s portfolio ‘to do what they do best – i.e. invest for the future as there is no doubt that Brexit uncertainty has held back corporate spending’.
Moreover, with the attraction of UK equities increasing, Horner and Taylor believe that we could see more takeover interest in UK companies from both overseas competitors and private equity. They also believe more companies will now list on the UK stock market, ending a long dry spell for London-listed IPOs.
DISCLAIMER: SVM UK Emerging Fund referenced in this article has a stake in AJ Bell, the owner and publisher of Shares. The author James Crux and editor Daniel Coatsworth own shares in AJ Bell.
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