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MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – September 2016

MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – September 2016

The Fund returned 3.08% in September outperforming its IA All Companies peer group and capping off an excellent 3rd quarter when it returned 18.51% as it recovered from its post BREXIT lows at the end June

At the individual stock level our best performing share was Solid State, as it bounced from relatively depressed levels. Another industrial Avon Rubber also rallied after a reassuring trading update. Elsewhere three of our technology stocks Craneware, IQE and Quixant all performed strongly after publishing upbeat results. On the negative tack, Curtis Banks sold off after warning of higher administration costs and lower interest receivable going forwards, and Eckoh was hit by problems at its recent US acquisition. We very much like Eckoh’s core business and used the consequent share price weakness to increase our holding.

We added three new holdings during the month investing in Hollywood Bowl, the acquisitive and cash generative UK ten-pin bowling market leader at IPO, in Bodycote an outsourced industrial services provider and Equiniti the UK share registration and corporate share dealing business, which enjoys high levels of recurring revenue.

Looking forwards, this month’s Tory party conference has brought BREXIT back to the fore and the consequent weakness in sterling has caused a mini re-run of this summer’s events with domestic cyclicals experiencing another bout of jitters and overseas foreign currency earners, which dominate the FTSE100 and where the Fund has no exposure, forging ahead. Natural resources sectors have been being particularly strong, creating a performance headwind for the Fund causing it to give up some of its recent relative outperformance. UK GDP numbers have been relatively robust since BREXIT and if this persists it should be helpful for small and mid cap relative performance as we move into the New Year, however with elections in US and Europe there’s also the likelihood of heightened market volatility with any uncertainty driving the occasional flight to mega cap liquidity.