The Fund aims to achieve consistent capital appreciation over the longer term by investing in stocks of primarily UK-listed large and mid-sized companies. Up to 10% of the Fund may be in international stocks. A thematic, top-down process is used to identify stock ideas and then married to a rigorous approach to valuation. Portfolio construction is benchmark-unaware with roughly equally-weighted positions in typically 30-40 stocks reflecting high conviction management.

The fund rose by 2.70% in March, lagging the FTSE All Share, which was 4.46%, led by a strong performance from banks and commodity companies. 
Portfolio companies delivered some upbeat sets of results. Next reported sales and profit growth of 5% for the year to the end of January and were positive about the outlook for the UK consumer. The business is emerging from a period of considerable investment; it has increased online capacity by 50% since 2021 with a £200m investment in new warehousing with packing technology, which reduced the time it takes to pick an item by 56%. The group has considerable growth opportunities in providing a sales platform for smaller third-party brands and through franchise and distribution contracts internationally for the Next brand. 

Smiths Group announced organic revenue growth of 3.9% with good cash generation and a strong balance sheet geared under 1x Net Debt: EBITDA. Smiths Group has improved its go-to-market approach through systems investment and sales teams and, as a result, is seeing over a 50% win rate for its CTiX Scanners (where liquids and electrical items no longer need to be removed from bags), two major defence order wins with the UK’s Ministry of Defence and US Department of Defense and growth in aftermarket sales in the John Crane division of 17% year on year. 

Following on from Mondi’s full-year results, we met with the management team to discuss the group’s strategy. Mondi has strong market positions in both corrugated and flexible paper-based packaging. In its kraft-based paper business, which produces plastic-free coated paper packaging such as dog food bags, the group is the largest producer in the world, with a market share of close to 26%. The shift away from plastic packaging is driving strong demand for its plastic-free solutions; for example, it has produced a fully recyclable paper-based bag for Finish dishwasher tablets. Whilst we did not discuss the bid the company has made for fellow paper and packaging business, DS Smith, we were reassured that Mondi maintains its disciplined approach to capital allocation with an ability to grow its footprint with customers both organically and via targeted acquisitions with a focus on achieving a low to mid-teens Return on Invested Capital (ROIC). 

On the subject of returns, it was pleasing to receive confirmation from Serco that our targeted engagement to keep the 25% weighting in management’s long-term incentive plan based on ROIC was successful. For a business that writes contracts, we believe ROIC is the most critical measure to drive the contract-writing discipline by management. Serco has come a long way from its lows of 2013/14 to the successes it is reporting today, and we are keen that the corporate memory doesn’t fade.  
 

Data shown net of fees, net income reinvested. Performance of other share classes may vary and is available on request. Please note that all fund performance is shown against the FTSE All-Share TR Index. 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.