Fund manager commentary
October was another strong month for equity markets, and smaller company shares advanced again. European stocks were particularly strong as inflows into the markets from global investors continued, while Asian markets also picked up after earlier weakness. In the UK, better news on the economy continued to come through, with the pace of recovery improving in recent months. The NAV outperformed the Benchmark.
Stock selection was positive in the two largest segments of the portfolio, the US and UK. In the US, a number of stocks including retailer Conn's, education stock Grand Canyon Education and real estate company Tejon Ranch, performed strongly. In the UK, car retailer Vertu flagged better than expected trading and fund manager Polar Capital announced better than expected fund flow news, while several other companies produced pleasing trading updates.
In Europe, our portfolio rose in value but by less than the local small cap index over the month. Two of the weaker stocks were Aer Lingus, the Irish airline, which was hit by signs of increasing price competition in the market, and luxury goods company Tod's. Luxury consumer goods stocks have been out of favour reflecting adverse currency issues and the slowdown in China. We did benefit however from good performances in the financial sector, notably from Aareal Bank and Storebrand, while truck equipment supplier SAF Holland was also strong. The Rest of the World portfolio, based around our holdings in third party managed funds, had a good month, with Utilico Emerging Markets and Scottish Oriental Smaller Companies outperforming the local indices. The Japanese small cap market was flat in the month. We took advantage of this and added to our existing Japanese fund holdings. Corporate earnings news is looking encouraging in Japan, and the economy appears to be responding to the stimulatory monetary policy environment.
As at 31 October 2013
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.