The equity market performed well in March, underpinned by a supportive results season with companies for the most part meeting or beating forecasts, which were conservatively set during the pandemic. Updates on current trading have been generally quite upbeat, as companies outside the travel and leisure sector have learnt to adjust to operating effectively during lockdowns. The Fund itself performed relatively strongly with positive momentum across a broad number of holdings. Notable contributors were Volution, the building materials group, which reacted well to strong interim results, Kape Technologies (internet security) rose on the back of an earnings enhancing acquisition, whilst Gamesys (online gambling) was ahead after an agreed take-over approach.
During the month we added a number of our preferred mid-Cap names to the portfolio, where recent performance has, in our view, unnecessarily lagged the rebound in the wider market. We bought back into Clarkson, the shipbroker, after a long period of absence, and into Spirent, the mobile networks testing business, which should benefit from the 5G roll-out. We also started a holding in Vesuvius, molten metals consumables, to increase the Fund’s exposure to the wider industrial recovery. We participated in three IPOs in March starting positions in ActiveOps (back-office automation software), In The Style (an innovative online fashion retailer with a collaborative social media influencer brand marketing model) and tinyBuild, on online games developer, effectively maintaining our exposure to this growth market, having lost Codemasters to an agreed take-over earlier this year.
Investors continue to focus on the domestic economy, with the government so far holding to its roadmap out of lockdown as the vaccination programme progresses, making the UK look increasingly attractive for investment, given the likely pace of recovery relative to what is available elsewhere. This coupled with the continued rise in the US long bond yield, raising the spectre of inflation, is increasing the appetite for the more lowly valued UK cyclical names. From a Fund perspective, whilst performance has benefitted from its recently increased exposure to cyclical names, it is still geared more towards growth. It has also enjoyed a strong start to the year and as we progress through April short-term valuations have started to look somewhat elevated in our view.