Fund manager commentary
Share prices initially fell at the start of May, following on from the weakness in April, but later on they rallied as sentiment recovered. Japanese small caps performed well this month, having lagged other parts of the world in the early part of 2014. The NAV rose, but was a little behind the Benchmark for the month.
In the US, we were behind the Russell 2000 as technology and healthcare stocks, sectors in which we are light, staged something of a revival. At the stock level, there were several weak performers, notably electronics stock Mercury Systems where takeover discussions appear to have come to nought, Bottomline Techologies, where organic growth has slowed, and Safeguard Scientifics, which saw downgrades. More positively Pernix Therapeutics jumped after it announced an acquisition from Glaxo and Spectrum Pharmaceuticals announced positive results.
In the UK we were helped by a rise in Salamander Energy’s shares as the company confirmed a number of bid approaches and recent purchase Halfords was also up on the back of a positive trading statement. Other strong performers included Digital Barriers as it announced some good new contract wins and industrial products distributor Trifast, which made a very earnings enhancing acquisition in Italy. On the downside, Supergroup announced relatively weak recent sales trends and Safestore ran into profit taking as investors lost their appetite for housing market related stocks.
In Europe, we were a little behind for the month as a whole, with a couple of our Irish holdings, Aer Lingus and Irish Continental Group falling back, the former mainly as a result of a dispute with its union. On the funds side, the Japanese holdings outperformed the rise in the local market and we also saw most of the Asian facing funds move up in May.
As at 31 May 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.