The Fund returned 1.21% in October outperforming its IA UK All Companies benchmark, which posted a -3.23% negative return. Unusually, the technology and healthcare sectors provided both the best and worst contributors to the Fund’s performance, with Boku (fintech), EKF Diagnostics and Polarean (healthcare) leading the way and Clinigen (healthcare), IMIMobile and CentralNic (technology) being the main detractors. It was notable that outside the top three performers, some of the Fund’s more cyclical holdings have started to perform with Tyman and Volution (building materials) and Weir, Synthomer and Volex (industrials) featuring amongst the top ten contributors.
Dealing activity in October was characterised by top-slicing holdings on valuation grounds that have performed well through the pandemic, with reductions in technology momentum stocks (notably dotDigital, IMIMobile, Codemasters, Gamesys and AlphaFX) and healthcare stocks, such as Maxcyte, Avacta and EKF Diagnostics. On the buy side, money was recycled into more cyclical holdings, whose valuations have been impacted by the pandemic, such as Travis Perkins, VP Group, Vitec and Augean and other less highly rated names, including Stock Spirits, Brooks MacDonald, Qinetiq, Eco Animal Health, and Inspecs.
The market continues to be characterised by high levels of volatility, as investors try to adapt their portfolios to evolving pandemic news-flow. The end of October saw a minor cyclicals sell-off, as England went back into a full lockdown, only to be followed by a sharp resurgence in value shares on news of a viable Covid-19 vaccine at the beginning of November, with investors scurrying around to re-position themselves in oversold cyclicals for the possibility of life returning to normal. Whilst it’s likely that the pandemic will continue to have repercussions through 2021, what is evident is that businesses outside the travel and leisure sectors now seem better placed to cope than they were through the initial lockdown. Other uncertainties like BREXIT remain, but the likelihood of a deal now looks more promising, and the market is also anticipating a smooth transition to a Biden presidency in the USA, with any left leaning agenda likely to be curtailed by a Republican Senate.