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

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

UK markets were down again in June, missing out on the AI-driven US rally. The picture remains dominated by inflation and a surprisingly strong UK number, showing an acceleration in core inflation, prompting a 50bps hike by the Bank of England, driving up expectations for both the peak rate and the duration of higher rates. Whilst the Fed paused their rate hike cycle in the US, both they and the ECB highlighted that more increases were coming. PMIs across Europe indicated a gloomy picture for manufacturing but a more positive outlook for Services, driven by wage inflation and relatively full employment, alongside the drawdown of pandemic savings. The UK continues to trade at a material discount to broader Global Equities, but we believe more evidence is needed of a downward path of inflation before we will see a re-rating.

From a performance perspective, Brooks MacDonald and Foresight Group bounced from recent lows, Alphawave was driven higher by the AI theme given its exposure to data-centres and Futura Medical was strong as they received FDA approval for their MED3000 over-the-counter medical product, which they will now look to partner in the US. On the negative side, Alpha Financial Markets sold off after flagging longer sales cycles and higher levels of competition in the consultancy space, despite trading in-line with market expectations. Also weak were GB Group, as brokers downgraded forecasts post their full-year results, GlobalData, on a director share sale, and Mortgage Advice Bureau, given the impact on the housing market of the increase in interest rate expectations.

We continued to add to our new holding in JTC, using their fundraise to acquire a competitor in the US personal trust sector to purchase more shares. We also added a holding in Bango, a leading alternative payments provider. On the sell side, we exited our Sureserve holding (subject to a recommended takeover bid), and trimmed Alphawave and Brooks into the recent strength.