The Fund, and UK Small and Mid cap segment of the market in which it invests, enjoyed something of a relief rally in December as fears over the potential impact from the Omicron Covid 19 variant subsided and the prodigious amount of fund raises from already listed companies and IPOs paused for the festive break, giving the market a much-needed opportunity to get its breath back.
At the individual stock level, the main contributors to the Fund’s performance were Clinigen, which was the subject of a recommended takeover offer, Big Technology, Devolver Digital, which continued to perform strongly after its recent IPO, and Alpha Financial Markets and Future, which both performed well on the back of good financial results. The main detractors to the Fund’s performance were Synthomer, on the back of some negative broker commentary, and Venture Life, a small holding in the Fund, which issued another negative trading update.
During the month we backed three new IPOs, namely LBG Media – a multi-channel digital publisher of content for the youth market, providing advertisers with access to otherwise hard to reach interest groups in the 16-30 age bracket; Public Policy Holdings Company – a US based government lobbying and public affairs business with a long-standing list of retained blue-chip corporate clients, which IPOed, in our view, at a very attractive valuation; and finally the Fund took a small position in Ondine Biomedical, a pre-profit biotech with a novel anti-microbial technology to combat hospital acquired infections. We supported two fund raisings by existing portfolio holdings. One by Ideagen to support its successful acquisition strategy and a placing by Eckoh to finance its acquisition of a smaller secure payments competitor. Elsewhere we continued to build up our holding in LSL Property Services and topped up Convatec after a period of weak performance. On the sell side, we took the top off a broad number of holdings, taking some profits in Future, Advanced Medical Solutions, Next Fifteen, Alpha FX and Liontrust Asset Management to name a few.
Looking forward, concerns about inflation are likely to continue to weigh on the market as we go into the New Year, favouring value stocks from a performance perspective. Over recent months, we have started to see a derating in the Tech names. Valuations are still high, but no longer stratospheric. If this derating continues to play out, we plan to gradually increase the Fund’s exposure to our preferred Tech names, which have historically been a key driver of the Fund’s longer-term performance.