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MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – April 2023

MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – April 2023

The fund, along with UK markets, was up in April, as concerns about the global banking sector diminished, despite ongoing volatility amidst US regional banks, highlighted by the rescue of First Republic in early May. Globally, we had further rate rises to combat inflation that is more persistent than hoped. In the US, expectations are for a mild recession and that interest rates have now peaked, whilst in Europe, further increases are expected by the BoE and the ECB, albeit the end may now be in sight, which should be supportive for Small and Mid-Cap growth stocks. Whilst the outlook for the UK economy in 2023 is lacklustre, corporate reporting has been broadly in-line with expectations and there are positive indicators such as improving consumer confidence and stronger service PMIs.

One theme of April was the increase in corporate activity and, more specifically, the reappearance of Private Equity bidders. This drove our strongest performer, Sureserve, the energy services provider, which was subject to a recommended bid by private equity at a 39% premium. Also strong in the month were Alpha Group International (continued strength in the share price after positive results in March) and LBG Media, as they announced their full year results and trading in line with expectations thus far in 2023. On the downside, RWS, the technology enabled language services business, sold off after reporting softer activity levels and slower decision making amongst certain clients, prompting downgrades to forecasts. Also weak were R&Q Insurance, as they warned due to a poor performance from their legacy business, and Alphawave IP, as their shares were suspended due to audit delays.

During the month, we continued to build up our position in Oxford Metrics, and added to Clarkson, Next Fifteen and Craneware on share price weakness. We exited our Kape Technologies holding on announcement of an increased and final offer for the company, reduced our Devolver position on a change to the cash flow dynamics and decreased our Elixirr holding.