April was a good month for the Trust, which rose 3.0% (using fair value NAV) relative to the FTSE All-Share which fell 0.4% (both on a total return basis).
Following the unexpected announcement of a UK general election, sterling rose relative to currencies such as the US Dollar. This caused the large capital FTSE 100 Index, which is highly international in terms of its end market exposure, to underperform as its international earnings are now worth less when translated back into sterling. In contrast more domestically orientated small and medium sized companies in the UK materially outperformed. This benefitted the performance of the Trust as we hold approximately two thirds outside of the FTSE 100 Index.
The best performers during the month tended to be domestically orientated smaller companies including Conviviality Retail (an alcohol wholesaler and owner of ‘Bargain Booze’ stores), textile rental company Johnson Service Group and building materials company Epwin.
Among the weakest performers was IP Group, which aims to commercialise technologies from UK and US universities. One of its peer group, Allied Minds, materially wrote down its assets and therefore IP Group fell in sympathy. We do not, however, think there is relevant read across from Allied Minds as IP Group’s portfolio is largely listed (and therefore is more transparent in terms of its valuation). We therefore added to the position in IP Group on share price weakness.
During the month we reduced the positions in mining companies BHP Billiton and Rio Tinto. In both cases while the companies have good quality assets the shares have re-rated considerably. We added on weakness to a number of our existing holdings including 4D Pharma (an early stage pharmaceutical company), International Personal Finance (an emerging markets consumer credit company) and Redde (which provides services such as car hire for the motor insurance industry).
NAV - The total value of a fund's assets less its liabilities.
Total Return - The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio.
Re-rated - When the market changes its view of a company so that fundamental ratios return to long-term averages or higher.
Stock examples are for illustrative purposes only not advice.