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MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – April 2022

MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – April 2022

Whilst the re-election of Emmanuel Macron in France removed one area of risk, the market continued to focus on supply chain concerns, the ongoing pursuit of zero Covid in China (and associated lockdowns) and, most importantly, inflation and the response by Central Banks. Post month-end, the Fed and BoE lifted rates by 50bps and 25bps respectively, in-line with expectations, with the market concentrating on the associated commentary. In the UK, the MPC expects inflation to peak at c10% and forecasts a slowdown in GDP. However, there remains significant uncertainty around some of the key variables affecting these forecasts, namely the ongoing conflict in Ukraine, the rate of supply chain easing, the ongoing strength of labour markets and UK consumer confidence.

From a portfolio perspective, our two largest contributors were RWS and Homeserve, both related to private equity approaches. The former saw a rumoured private equity bidder confirm it was in the early stages of considering an offer, whilst the latter confirmed it was entering discussions with a potential bidder. Also strong in the period were Alpha Financial Markets Consulting and CentralNic with both announcing trading significantly ahead of forecasts. On the downside, two of our larger holdings sold off: Big Technologies after a strong run in the share price and Future on concerns about the macro-economic environment and the effect this might have on their e-commerce and advertising revenues. Also weak was Accesso, giving up some recent gains, and Avon Protection, announcing that H1 profitability would be below expectations due to a weak sales mix and additional manufacturing costs.

On the transaction front, we sold Alpha FMC, Chemring, Essentra and Tate & Lyle on strong share price performances and exited our holding in IWG. On the buy side, we continued to add to Gamma Communications and restarted a holding in Genuit (formerly Polypipe), both on share price weakness, and added to Equals and Spirent on what we feel are attractive valuations. Looking forward, we continue the strategy of increasing our exposure to structural growth names as growth stocks de-rate. We believe the increased level of Private Equity approaches highlights the attractiveness of the valuations of a number of the Fund’s holdings.