Fund manager commentary
Equity markets lost their positive momentum during January, undermined mainly by concern surrounding emerging markets, but there was also data suggesting that growth in the US might be slowing down. Volatility returned to the currency markets, with emerging market countries with current account deficits under particular scrutiny. The NAV fell back in the month and we underperformed the benchmark.
Our US portfolio lagged the Russell 2000 Index in January, with The Chefs’ Warehouse hit by the effects of the very cold weather and by margin pressure on its meat business. Retailer Conn’s also fell as competitors announced weak results, while car parts business LKQ was another underperformer. On the other hand, software business Allscripts Healthcare Solutions and medical business Alere were strong following positive updates.
On the UK portfolio, we were just ahead of the local small cap market, with telecoms business Alternative Networks rising following the announcement of some acquisitions. Mining stocks remained very out of favour but Petra Diamonds rose on the back of an encouraging update, while retailers JD Sports, Vertu Motors and door and window component supplier Tyman Group were also strong. On the downside some of the more recent good performers such as Amerisur Resources and CLS Holdings succumbed to profit-taking, the latter after it announced that its chief executive was leaving.
In Europe, we benefited from good share price performance from telecoms company Jazztel, which was lifted by bid speculation, Neopost, where an investor day was well received, and automotive parts supplier SHW, which announced strong sales numbers. Against this, luxury goods company Tod’s produced a disappointing set of figures and the highly rated shares fell back.
Our fund holdings exposed to emerging markets were unsurprisingly under pressure and the Scottish Oriental Smaller Companies and Utilico Emerging Markets funds dropped sharply as their discounts widened. Our two Japanese funds were broadly flat in the month, close to the market performance, but news on the corporate earnings front has been generally encouraging. We have been increasing our Japanese exposure of late, trimming back on the UK weighting as a result of its recent relative outperformance.
As at 31 January 2014
The yield is calculated on an historic basis using the actual dividends paid during the company's last financial year and the closing share price as at the end of the relevant month.
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.