Fund manager commentary
The 4.9% rise in the FTSE All-Share in February more than made up for the fall of 3.1% in the first month of the year. Although the FTSE 100 is still some way off its all-time high set in December 1999, the strength of medium and smaller sized companies has led the broader All-Share Index towards record levels.
February was a busy month for company announcements, particularly those with December year end results to report. On balance, most companies reported figures in line with expectations allowing share prices to progress, but there were a number, including Tate & Lyle, RSA, HSBC, BAe and Rolls Royce where disappointment led to share price weakness. On the more positive side, we benefited from very strong results at the Lloyds insurance company Beazley, which also announced a special dividend, and the possible bid for Essar, where we own the convertible bond.
The strength of the equity market, and the return of cash to Vodafone shareholders from the take-over of its US joint venture Verizon Wireless, has encouraged the new issue market. A wide range of enterprises, with varying strengths of business model, are being floated, often at prices that look fairly demanding.
The macro-economic background has continued to show some encouraging signs for the UK, with unemployment falling to 7.1% and CPI falling to 1.9%, at last below the Bank of England’s official target, and this has led the Governor to have to revise his previous forward guidance on interest rates. Outside of the UK, the most significant events were the growing instability and regime change in the Ukraine.
As at 28 February 2014
The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market movements. Past performance is not a guide to future performance. When you sell your shares, you might get back less than you originally invested. If markets fall, gearing can magnify the negative impact on performance. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. Emerging Markets, Unquoted Companies and Smaller companies carry a higher degree of risk and their value can be more sensitive to market movement; their shares may be less liquid and performance may be more volatile. The fund may invest in hedge funds or private equity funds which are not normally available to individual investors, exposing the fund to the performance, liquidity and valuation issues of these funds. Such funds typically have high minimum investment levels and may restrict or suspend redemptions or repayment to investors. The asset value of these shares and its prospects may be more difficult to assess.