For financial professionals in the UK

Fund Manager February Commentary – Lowland Investment Company

Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

12 Mar 2021
3 minute read

The most material move during February was a steepening yield curve (in other words the cost of UK government borrowing rose, particularly for borrowing over longer time periods such as 10 years and over). This rise in yields came about as expectations rose of a faster domestic economic recovery, possibly leading to a rise in future inflation levels as pent up consumer demand could be spent in a relatively supply-constrained economy. A steepening yield curve led to a sharp rotation within the UK equity market, with defensive sectors such as healthcare and consumer staples underperforming, while financials, energy and materials performed strongly. In this context, the Trust’s underweight position in consumer staples, and overweight position in financials were among the largest contributors to relative performance at the sector level.

At the stock level, the largest contributors to performance during the month included companies positively exposed to the ‘opening up’ of the domestic economy as the vaccination programme continues its successful roll-out. This included Redde Northgate (which supplies vehicles for hire and is therefore positively exposed to traffic volumes increasing) and Johnson Service Group (which supplies textile rentals, including for the hospitality industry).

During the month a new position was initiated in Convatec, a supplier of medical equipment such as wound dressings. Under a relatively new chief executive Convatec are investing heavily in research & development and sales and marketing in order to reinvigorate organic growth. At the last set of quarterly results there was some evidence that organic growth is improving, and in our view a steady improvement in growth is not currently factored into the valuation. This is an area we will be watching closely at the upcoming fourth quarter results and in 2021 guidance. Elsewhere the position in Vodafone was added to following better than expected results, and the position in AstraZeneca was added to as it has (since the Alexion acquisition was announced) de-rated relative to the global pharmaceuticals sector. The position in water utility Pennon was sold, as in our view there are better total return opportunities elsewhere in the UK market.


Yield: The level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.

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Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


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Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
  • Some of the investments in this portfolio are in smaller company shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
  • This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.