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UK Multi-Cap strategy - Signs of economic recovery are being met with rising markets

  • 22 June 2020 (5 min read)

Key points:

  • The UK equity markets continue to rally in May
  • Stock selection and sector allocation drove outperformance
  • Demand for cars and housing markets remains healthy

What’s happening?

Global equity markets posted positive returns in May, as slowing coronavirus infections resulted in governments action to ease lockdown restrictions. With case load data improving in many countries, investors are increasingly prepared to look forward to economic recovery and an improvement in company earnings. Oil prices rebounded strongly over the month as evidence grew of high levels of compliance following the announced OPEC+ production cuts. Political and economic risks remain as US-China relations continue to deteriorate and Brexit negotiations grind on.

In the UK, Mid cap companies (represented by the FTSE 250 index) continue to outperform large cap companies (represented by the FTSE 100 index) over the month.

Results from companies so far have reflected the significant disruption being caused by the COVID 19 pandemic. While it is too early to draw broad conclusions, we remain optimistic about the maintenance of productive economic capacity as a direct result of the financial support being offered to companies from banks, shareholders and governments. We continue to monitor how management teams are reacting to the current situation and are optimistic of economic recovery over time.

Portfolio positioning and performance

Over the month, the UK Multi-Cap strategy continues to perform positively in May, outperforming the FTSE All-Share Index. Outperformance was driven by both stock picking and sector allocation. Our long term overweight position in consumer services and our strong stock selection within this sector were beneficial to relative performance – our UK Media company, Future Plc, has strongly rebounded back in May after a  difficult month of March. The company has seen a strong increase of its operating profits with an acceleration of audience growth at the end of the period. Future reported a 2 digit number growth within its Online users segment following an increase of searches for advice and recommendations related to the coronavirus pandemic. Besides, both Autotrader, the UK largest online car sales platform, and Rightmove, the leading UK online property portal, have also strongly rebounded back over the month following the UK government confirmation to further ease the lockdown in June. Despite the economic shock due to the covid-19 pandemic, online research trend data suggests a significative increased in demand for cars and housing markets. Elsewhere, our Healthcare name, Clinigen, continue to strongly perform in May after a healthy month of April.


Movements in COVID-19 case load, the incidence of mortality, together with the pace and extent of economic recovery will dictate both economic sentiment and performance over the short term. Central bank support remains widespread and there no evidence of restricted liquidity for either capital markets or individual businesses. Signs of economic recovery are being met with rising markets as risk appetite improves. It is worth remembering, however, that although economies are showing signs of improvement, the absolute fall in economic output remains significant.

We will continue to focus on UK and internationally-exposed businesses, where the fundamental profit drivers remain entrenched and equity holders benefit from the capital allocated and risks taken by management. We continue to believe that a rewarding strategy is to actively invest in UK-listed companies that are compounding their earnings and dividends, where corporate governance is world leading, where contract law and title law are dependable, and where company management teams are permanently accessible.

No assurance can be given that the UK Multi-Cap Strategy will be successful. Investors can lose some or all of their capital invested. The UK Multi-Cap strategy is subject to risks including; Equity; Smaller companies risk; Liquidity risk; Investments in small and/or micro-capitalisation universe; Investments in specific countries or geographical zones.

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