Year-to-date fund performance has also held up well. The fund entered the year defensively positioned. In February the fund held around 18 per cent in cash to allow it to take advantage of buying opportunities presented by Brexit negotiations.
Not only did this help protect the fund’s value in the sell-off, it allowed the fund to top up several core holdings and participate in several share issues as businesses recapitalised.
The UK continues to face several headwinds, including the future relationship with Europe and the recovery from Covid-19. The end of the furlough scheme could hit smaller companies hard, and sentiment could quickly turn against smaller companies.
However, the fund remains defensively positioned and continues to hold a high level of cash (around 17 per cent of the portfolio). Combined with its focus on quality stock selection, the fund remains well positioned to benefit from short-term market fluctuation.
Charles Younes is research manager at FE Investments
