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

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

Having appeared to be closer than ever to a BREXIT transitional agreement, the withdrawal of this agreement from parliament and the subsequent calling of a general election has served to further the uncertainty in the UK. Added to this, sentiment around the outlook for the global economic environment is cautious, and this has been reflected in some of the more recent corporate reporting and, particularly, companies’ outlook statements. Over the next month, we’d expect to see the headlines dominated by the election and the impact this will have on government spending decisions, corporate activity and corporate investment. However, depending on the outcome, we may end the year with more clarity around BREXIT and, combined with improving US-China relations, this would be positive for UK equity markets as we exit 2019.

Our top performer this month was Future, our largest holding, which bounced strongly on the announcement of the acquisition of TI Media, a UK based magazine and digital publisher. Alpha FX also performed well on the back of an update indicating they were trading ahead of analyst expectations. Our main detractors to performance in the month were Accesso, who are currently subject to a formal sales process and announced that none of the bids it has received to date are at a level that offers sufficient value to shareholders, and Castleton, who warned that product and professional services sales would be lower than expected. During the period, we added to our DotDigital holding on strong final results, and our Clinigen position on weakness in the share price. We also reduced our Convatec and Avon Rubber holdings on rising share prices.

At the time of writing it is gratifying to note that the Fund has now reached its fifth anniversary topping its IA UK All Companies sector. The performance has been achieved against a backdrop of quite considerable political and economic upheaval with the BREXIT vote mid-year 2016 and Trump’s election and subsequent trade wars disrupting global supply chains and GDP growth. Hopefully, this performance underlines the merits of our very simple investment strategy of investing in cash generative companies that can fund their own growth and we will continue to manage the Fund on this basis going forward.