Fund manager update

  • Fund manager update
  • 3 minute read

By Sam Barton

Market in focus

Equity markets staged a recovery during the quarter to 31st March 2019 as central banks reversed their hawkish monetary policy stance, giving investors hope that asset prices would see continued support from a lower cost of borrowing. With this supportive backdrop, the MSCI UK Index posted a total return of 9.4%. The Numis Alternative Markets Index (NAMI) generated a respectable total return of 6.5%. Once again, there was a disparity between the performance of the largest companies on AIM and their smaller peers, with high growth stocks back in vogue as the fear of rate rises subsided. Our limited exposure to the biggest and most highly-rated companies on AIM saw the average portfolio in the Service marginally lag the performance from NAMI, returning 5.7%.

A policy volte-face from the Federal Reserve in January saw expectations for the number of US rate rises in 2019 fall from two to zero, giving investors comfort that the era of “cheap” money is set to carry on into this year. China has reduced banks’ reserve requirement ratio in response to wider interest rate reforms, while increased infrastructure spending and tax cuts are expected to offset the headwind from tariffs. In Europe, slowing trade saw Germany avoid recession by the narrowest of margins while Parliamentary elections, moribund growth, the risk of an Italian default and the ongoing Brexit negotiations are proving negative for investor sentiment.

Domestically, public finances are in respectable shape, GDP growth has stayed firmly positive and unemployment has reached its lowest level since 1975. Real wages have grown, boosting consumer spending and providing some offset to lower business investment. While the Government and Bank of England retain some financial flexibility to act in the event of a “no deal” departure, the impasse in Westminster is proving increasingly detrimental to future growth as investment dries up. This means that UK equity valuations (with the exception of certain AIM shares) look reasonable on a long-term basis, giving us comfort that there is plenty of upside in the event of a benign Brexit.

The key contributors to performance during the quarter included GYG (+65.3%), which issued a reassuring trading statement, Augean (+30.6%) where final results displayed strong cash generation, prompting upgrades, while M&C Saatchi (+29.8%) announced that it had outpaced wider market growth, and James Latham (+26.8%) benefitted from the acquisition of an Irish timber distributor. The main detractors from performance were Amino Technology (-26.7%) which announced plans to exit its low margin hardware activities, Van Elle (-41.9%), which warned that profits would be significantly lower than expectations, and FireAngel Safety (-48.8%), where management warned that higher production costs would impact profits for 2018 and 2019


Important information

This article is only intended for use by UK investment professionals and should not be distributed to or relied upon by retail clients.  Please note there is no guarantee that the CITS investment objective will be achieved. The value of investments will go up and down and clients may get back less money than they invested. Past performance is not a reliable indicator of future returns. The information contained in this document is believed to be correct but cannot be guaranteed. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation.

Specific information
CITS is a tailored discretionary investment portfolio management service that invests in both the Alternative Investment Market (AIM) and NEX Exchange (NEX) markets, with the benefit of major tax advantages introduced by the Chancellor of the Exchequer in his budget of March 2000. CITS is an Inheritance Tax mitigation service based on current tax law and practice. The tax treatment depends on the individual circumstances of each client and may be subject to change in the future. CITS invests in ‘qualifying shares’ in smaller companies which may be more volatile than investments in more established companies. Such companies can be subject to certain specific risks not associated with larger, more mature companies. Consequently this can make the CITS portfolios more volatile as the value of an investment may fall suddenly and substantially. CITS is considered suitable only for informed and experienced investors.


Before you invest, make sure you feel comfortable with the level of risk you take. Investments aim to grow your money, but they might lose it too.