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MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – December 2019

MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – December 2019

After last month’s election result, the market bounced sharply, with domestic earners particularly strong. However, since the turn of the year, this enthusiasm has been tempered by concerns over the short timetable the Conservative government has set for negotiations with our European partners for a future trading relationship. Nevertheless, with greater clarity from a political perspective for the next 5 years, we have already seen an improvement in business confidence and a strengthening sterling, which should benefit UK earners once we move past the generally subdued Q4 trading statements. An increase in government spending expected in March’s budget and signs of a more accommodative monetary policy should be supportive to UK GDP. From a global perspective, the US and China recently signed a phase one deal regarding the nature of their future trading relationship, but there are still many items to address before there is any resolution in the uncertainty this causes. Combined with rising tensions in the Middle East, there are a number of factors beyond our shores which will drive market volatility in 2020.

The Fund outperformed its IA UK All Companies benchmark for the year (returning 40.58% vs. the benchmark at 22.37%) and for the month (returning 8.47% vs. the benchmark at 3.75%). Our top 10 monthly performers were dominated by UK earners, such as Renew, Restore and Curtis Banks. We also saw a strong uplift from CentralNic, as the shares re-rated after the earnings enhancing acquisition of Team Internet, combined with a positive trading update in November. Finally, Volution’s share price performed well as shareholders took comfort that the problems at its new Reading manufacturing facility were behind it. During December, we started new holdings in two domestic earners: Gamesys (formerly Jackpotjoy), the UK’s leading online bingo operator, and Ten Entertainment, the UK’s second largest tenpin bowling operator. We also started a position in the Pebble Group at IPO, a provider of products and services in the promotional products industry. We exited our holdings in Spirent, Bodycote and Mind Gym on valuation grounds.