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.Please note that for capacity reasons the Fund is now 'soft-closed' to new direct investors.

Market dynamics were volatile in December. Rising Covid-19 infection rates globally created pressure, particularly in the UK where border closures and the persistent yo-yo of newsflow around Brexit negotiations ahead of the deal being announced weighed on sentiment. Underneath the surface of that volatility there was a continued rotation away from growth stocks towards certain value sectors. 

The Fund performed well over the month with the mining sector one of the strongest performers driven by the continued strength of commodity prices. Our five stocks, which in aggregate are c. 15% of the Fund, all outperformed, with Glencore and Rio Tinto the best performers. This sector remains very cheap, in our view, and is at the centre of two positive trends: the global economic recovery led by China, which will spread as the vaccine is rolled out in 2021; and the acceleration of the green agenda and decarbonisation, which is metal intensive. The oil sector was flattish, with Petrofac down on the back of a weak update. 

With the odd exception (such as Petrofac), the majority of the trading updates were strong and either in line or above expectations. This partly reflects cautious expectations but also the robust recovery in sectors where we have material exposure. Stocks with strong results, trading updates or capital markets events performed well. Good examples include Tyman, DS Smith, WPP, Drax and Morses Group. 

Financials were sluggish for most of the month. Barclays ended up only marginally underperforming the market across the year, which is remarkable given the nature of events. 

It is also noticeable that small caps have continued to strengthen – a number of our stocks in this bucket are making decisive new relative highs, such as Central Asia Metals, Tyman, Kenmare and Polar Capital. Small caps remain c. 17% of the Fund and, in our view, material value remains in this segment, which we think will be a major driver of the Fund’s relative performance in 2021.

Domestic stocks also picked up after the Brexit deal was announced. Some, such as ITV, have recovered well whilst others, such as the food retailers, which were hurt by the decision to repay the rates relief, were relative laggards.

We have previously highlighted that we expected resolutions on the US presidential election, Brexit and vaccine approvals to result in a change of leadership of global stock markets away from defensive, stay-at-home and growth stocks towards the recovery/value stocks where the Fund is largely positioned. The first vaccine approval in November gave this shift an impetus during November. But despite further progress on these issues in December, the leadership change has been somewhat held back by the resurgence of the virus in the UK, Europe and North America. We firmly believe that investors should look through what should be the last Covid economic pothole and concentrate on which stocks will pick up from an economic resurgence after Q1 2021. With very loose monetary policy, expansionist fiscal approaches, resilient employment levels, abnormally high savings ratios and very tangible pent-up demand, we expect a strong recovery once social distancing restrictions are loosened. This is particularly pertinent because valuations still remain very low in many parts of the recovery/value universe.

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.