After a sustained recovery from its lows last October, the Fund gave up some of its gains in June as it and the wider market paused in the absence of any meaningful commentary on the direction of interest rates from the Bank of England ahead of the election. The main detractors to the Fund’s performance were Next Fifteen and YouGov, both of which highlighted ongoing softness in marketing spend in Europe and North America, with YouGov warning of a material profits miss. The main positive contributor was Alpha Financial Markets Consulting, where a Private Equity approach led to a recommended offer for the business.

On the trading front we continued to re-build the Fund’s exposure to Industrials, from a relatively low weighting, adding to Spectris, Essentra and Bodycote. We also added to Coats, as its share price drifted back, and to YouGov, after the sharp fall in its share price following its profits warning. We used Mattioli Woods and Alpha Financial Markets, both trading near their recommended offer prices, as a source of liquidity.

We go into the second half of the year with a new government with a sizeable majority, which should help provide some stability after the frequent changes of leadership under the Conservatives. Given the fiscal constraints, it will be interesting to see how the new government can fund its growth agenda, but the dialogue around engaging with the private sector to drive growth suggests a reasonably business friendly approach. The manifesto commitment to increase investment from domestic pension funds in UK markets, suggest an appreciation that healthy economies benefit from successful local equity markets. Any reversal of the trend of consistent outflows from the London equity market would benefit the UK market’s performance.