The Fund aims to achieve long-term capital growth and to generate a dividend yield that is above that of the FTSE All-Share Index average. The Fund focuses predominantly on stocks within the FTSE 350 Index that generate a prospective yield above that of the FTSE All-Share Index average. The Fund's performance benchmark is the FTSE All-Share Total Return Index denominated in sterling.

Economic data in the US continues to reflect an economy where the consumer has run out of spending ‘ammunition’. Retail sales in May grew by just 0.1% month on month (MoM) and April was revised lower to -0.2%. With the savings ratio below 4%, consumers' spending power is clearly constrained until policy is eased. Several corporates also reflected these weaker spending patterns, including Nike, Walgreens and Brown-Forman. However, the Fed has relatively little room for manoeuvre in the short term, with inflation continuing to prove somewhat sticky above 3%. This month's CPI did come in modestly softer at 0.2% MoM for the core, but the subsequent Fed meeting notes showed that the average member of the FOMC is only assuming one rate cut during the second half of 2024, despite sluggish consumer activity. Interestingly, the Fed also moved its view of the long-term neutral interest rate higher again to 2.8% (vs 2.5% two months ago), which is highly unusual. An obvious conclusion is that it may cut rates by less than some market participants have been hoping for. 

The UK stock market’s strength subsided in June (with the FTSE All Share down 0.35%). The fund was down 2.58%, underperforming the market by 2.24%. Year-to-date, the Fund is up 12.24%, compared to the market increase of 8.13%. In many respects, June's performance trends represented a modest pullback and some profit-taking in some of the sectors that had led the market higher in the previous three months. We have recently added two new stocks to the Fund: Forterra and FDM. Forterra: As the second-largest brick producer in the UK, Forterra is well-positioned for growth. Factors driving this include falling interest rates, the Labour Party’s housing plans, and the general UK economic recovery. Forterra recently commissioned an efficient, low-carbon brick plant. With a current PE ratio of 5x, it has potential for growth if housing starts reach 200k per annum. FDM: This global tech-based consultancy places trained IT employees into large businesses. Despite recent profit warnings, FDM’s unique platform, strong management team, and net cash position make it an attractive investment. Demand for its services is likely to accelerate due to technological changes and legacy system updates.

The 2024 dividend growth forecast remains flat, considering factors like share buybacks prioritisation, delayed UK dividend growth, mining sector impact and sterling appreciation. Mid-year surprises and disappointments have occurred, with a positive rotational effect boosting Fund-level dividend growth. The Fund’s yield is around 5%, with significant share buyback activity across holdings. Approximately £40bn in equity is being bought back this year, representing a 5% average reduction in share count. This could lead to earnings per share, dividends per share, and share price increases. The combined effect of 5% dividend and 5% buyback creates a potent 10% dynamic.

The UK’s economic outlook is brightening, with a potential election result accelerating this trend. The Bank of England is likely to ease policy modestly, with rate cuts potentially smaller than expected due to rapid economic recovery. High consumer confidence, increased savings, and 3% real wage growth suggest a positive trajectory. Political stability in the UK, contrasted with rising uncertainties in Europe, could attract international investors. Compelling valuations have spurred M&A activity, and a potential Labour administration may boost domestic equities. With a focus on consumer spending and infrastructure projects, stocks in these areas could see significant growth.
 

Data shown net of fees, net income reinvested. Please note that all fund performance is shown against the FTSE All-Share TR 12pm adjusted. Performance of other share classes may vary and is available on request.Where shown, monthly returns table shows compounded discrete monthly performance.

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Past performance is no guarantee of future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. The annual management charge is deducted from the capital of the Fund. This will increase the income from the Fund but may constrain or erode potential for capital growth. The Funds investment include shares in small-cap companies and these tend to be traded less frequently and in lower volumes than larger companies making them potentially less liquid and more volatile.