For individual investors in the UK

Lowland Investment Company Fund Manager Commentary – February 2022

Laura Foll, CFA | Janus Henderson Investors
Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

James Henderson

James Henderson

Director of UK Investment Trusts | Portfolio Manager

22 Mar 2022
3 minute read

During February, the relatively modest -0.5% fall in the FTSE All-Share masked steep declines in some areas of the market as the repercussions of the conflict in Ukraine was felt. In this uncertain backdrop, the best performing sectors were those either exposed to rising commodity price (energy, materials) or those that are perceived to be ‘safe havens’, such as utilities. The financials sector, on the other hand, performed poorly. Some financials, such as fund management companies are directly exposed via their fee structures to stock market levels. Therefore if there is a fall in the market, all else being equal this will lead to earnings downgrades. The current level of uncertainty is also likely to weigh on capital markets activity (such as companies listing on the stock market), therefore for companies exposed to this area such as Barclays, if this uncertainty persists it could result in lower earnings than expected. In this backdrop the Trust underperformed the benchmark, falling 4.4% relative to a 0.5% fall in the FTSE All-Share benchmark and a 2.4% fall in its AIC UK Equity Income peer group (all figures are on a total return basis).

Within the portfolio the largest individual detractor at the stock level was online retailer Studio Retail, which entered administration and was written down to zero. While the company had in recent months downgraded earnings expectations as a result of supply chain problems, the company was, in its latest estimates, expected to remain profitable in the current financial year. This outcome was therefore highly unexpected. Elsewhere in the portfolio stocks more broadly exposed to the consumer such as Halfords and Marks & Spencer were also among the weakest performers due to the expectation that the current rise in commodity prices will worsen the existing pressure on real disposable incomes.

During the month, the existing position in Reckitt Benckiser was added to. Recent results have shown an improved organic growth trajectory outside of products that have been directly impacted by Covid. The positions in Hiscox, Phoenix Group and HSBC were reduced for portfolio balance reasons.

It is very difficult to draw firm conclusions given the current backdrop. However, it is likely that inflation will be higher than expected and persist for longer than was expected a few months ago given the current rise in commodity prices. In this type of environment, it is crucial to be invested in companies with pricing power, where there is a greater likelihood of input cost pressures being passed on, albeit often with a time lag.

Bloomberg as at 28/02/2022

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. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.


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.


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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 diversified across more countries.
  • Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies.
  • This Company is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental 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.
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