GVQ UK Focus invests in up to 35 UK companies which have been identified as undervalued using ‘private equity’ based valuation techniques – in other words assessing how a ‘trade buyer’ might value a business.
Manager Jamie Seaton is not constrained by market indices and aims to maximise returns for investors over the medium term. He invests in companies he perceives to have high quality, ‘covetable’ assets, which are generally niche market leaders with high barriers to entry and sustainable business models.
The fund has a very concentrated portfolio and large positions in certain stocks, which increases risk and the extent to which performance deviates from that of the broader market.
Performance has been good since Seaton took over as manager in 2009, outperforming the FTSE All Share. Historically it has been more volatile than this benchmark, but investors have been compensated for the exaggerated ups and downs over time.
More recently performance has waned. Its holdings (including some domestically oriented smaller companies) have been hit hard during the coronavirus pandemic, accentuating the trend of the ‘growth’ investment style over ‘value’ in recent years. While not an out and out ‘value’ fund the GVQ team will always be valuation sensitive. There was some evidence of the market trend reversing in the fourth quarter of 2020, which, if continued, should favour the fund.
The manager has also shown skill in identifying takeover targets. Eight holdings since Brexit in 2016 were taken over or merged with an average bid premium in excess of 50%.
We remain upbeat on the manager and retain our belief that funds from specialist ‘boutiques’ like GVQ can often be worth considering. However, we have opted to remove the fund from the Direct Investment Service Preferred List. Assets under management fallen following outflows from investors, which unfortunately has the effect of making the fund less competitive in terms of costs. At the time of writing total ongoing charges (including the fund’s stated annual charge as well as other expenses such as portfolio transaction costs) is 1.25% a year.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.
GVQ UK Focus – removed from the Preferred List
Read this next
UK equities – why the recovery story could be underwaySee more Insights