The Fund enjoyed a very strong April, as UK small and mid caps, where the Fund is focused, performed strongly, outshining large caps. The outperformance was broadly based with a third of the portfolio returning over 10% in the month. The outstanding performer was Statpro, which rallied sharply from a period of weakness caused by a stock overhang, returning over 40% in the month after it reported good figures followed by an earnings enhancing acquisition. Other notable winners were WS Atkins, which was on the receiving end of a recommended takeover bid, whilst IMIMobile and XP Power both responded well to positive trading updates. Finally Alpha FX, an IPO the Fund participated in, got off to a very strong start. There were no underperformers of note in April.
During the month we continued the process of selling down holdings where we felt that their valuations were becoming too stretched, exiting our holdings in both Bioventix and ULS Technology. We started three new investments, buying Alpha FX, a fast growing differentiated forex trading business, which helps medium-sized businesses manage their currency risk in a systematic way. We bought Euromoney Institutional Investors, a market leading subscription publication and events business selling into the financial services and metals markets, which have been subdued for some time, causing Euromoney’s shares to de-rate against its peer group, but where we’re now starting to see more signs of life. Finally we have invested in Ashmore Group, the emerging markets debt fund manager, where after a sustained period of fund outflows, the company has recently reported a pick-up in new business activity as its asset classes seem to have come back into vogue.
With the Conservatives ahead in the polls in the UK, Macron winning in France and the UK domestic economy still performing robustly, despite heightened sabre rattling over BREXIT, the market back-drop has been helpful for UK small and mid caps, with little to detract from generally improving bottom-up newsflow from companies themselves. However after such a strong period it wouldn’t be surprising to see a period of consolidation at some point, as valuations have obviously been pushed up and as we’re seeing an increasing level of fund raising activity both by existing quoted companies and new IPOs, which at some point may dent the available liquidity at the small and mid cap end of the market.