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Fund manager January commentary – Lowland Investment Company plc

Active versus passive investing – selectivity required | Janus Henderson Investors
Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

James Henderson

James Henderson

Portfolio Manager

19 Feb 2020
3 minute read

It was a moderately good month for the Trust on a relative basis although on an absolute basis the NAV fell. The Trust’s net asset value fell 2.6% on a total return basis while the FTSE All-Share benchmark fell 3.3%. The Trust benefitted from some of its small company holdings including Avon Rubber, XP Power and Churchill China performing well, while being ‘underweight’ large index weights that performed poorly including Royal Dutch Shell (which had disappointing results driven by their refining business) and HSBC (heavily exposed to Hong Kong where the economy is contracting).

The largest detractor from performance was law firm Ince, which did a placing at a large discount to the undisturbed share price in order to fund necessary working capital in the business (it was effectively an emergency rights issue). This was disappointing as this firm had been highly acquisitive during 2019 and the working capital problems came about because of the speed of acquisitions and poor forecasting on behalf of the (now departed) CFO. We took up our corner in the rights issue as it came at a very low valuation, the management team participated in the raise, and the new CFO is an improvement. It is a small position in the overall portfolio, less than 0.5% net assets at month end.

The ‘soft’ data coming from the UK economy during the month continued to be largely positive (for example PMI data and mortgage approvals), as evidenced by the Bank of England’s decision to hold off on cutting interest rates. Consensus real GDP growth for 2020 remains low at 1.1% (a similar growth rate to 2019) but the spread of forecasts is wide, ranging from the Bank of England which expects 0.8% growth, to, for example, the Panmure economist who expects 1.5% GDP growth and the Berenberg economist who expects 1.7%. While looking at top down forecasts is not how we manage the portfolio, recent data would suggest the economy is performing better than expected and this might benefit the more ‘domestic’ holdings in the portfolio including RBS, Ten Entertainment, Shoe Zone, the housebuilders (Taylor Wimpey and Bellway) etc.

Trading activity has been modest but has been focused on gently reducing companies held on high valuations versus history (such as Avon Rubber) and adding to lower rated, but in our view still good quality businesses such as Morgan Advanced Materials. The gearing remains relatively unchanged since recent history at just over 12%.


Net asset value (NAV): The total value of a fund’s assets less its liabilities.

The Purchasing Managers’ Index (PMI): an index of the prevailing direction of economic trends in the manufacturing and service sectors.

Gearing: A measure of a company’s leverage that shows how far its operations are funded by lenders versus shareholders. It is a measure of the debt level of a company.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


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.


The information in this article does not qualify as an investment recommendation.


Marketing Communication.






Important information

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.