The Fund fell back slightly last month, outperforming its IA UK All Companies benchmark, as the market generally subsided on fears of slowing global GDP. Its exposure to two defence stocks was the main contributor to this outperformance, as investors at large started to show more interest in this sector as political tensions between the global superpowers have risen and the USA in particular moves to catch up on defence spending, after a hiatus post the Iraq and Afghan conflicts. Ultra Electronics was a beneficiary of this spend, winning a sizeable long-term US Navy sonar order, and this coupled with reassuring results drove a re-rating. Avon Rubber, the gas mask company, rose very sharply on the back of a well-received acquisition of a US body armour business. The modest negative return for the Fund during the month had no particular feature with a large number of stocks drifting down, although this was more accentuated at Accesso Technology and Proactis, two stocks which having risen sharply on the back of bid approaches, fell back in the absence of any newsflow.
With the UK equity market, particularly domestic mid and small cap businesses, in the doldrums as traditional investors run shy because of BREXIT uncertainty, Private Equity and overseas corporates are having a field day acquiring unloved UK listed assets at knock-down prices, even after paying modest bid premiums, with bid announcements now a near daily occurrence. What they can see and domestic investors seem to have lost sight of, is that whatever the outcome of BREXIT, the UK has a large population of relatively affluent consumers, who are going to carry on driving cars, eating cheddar cheese and drinking beer!