HL SELECT UK INCOME SHARES

HL Select UK Income Shares - April review

Monthly roundup

Important information - The value of this fund can still fall so you could get back less than you invested, especially over the short term. The information shown is not personal advice and the information about individual companies represents our view as managers of the fund. It is not a personal recommendation to invest in a particular company. If you are at all unsure of the suitability of an investment for your circumstances please contact us for personal advice. The HL Select Funds are managed by our sister company HL Fund Managers Ltd.

Steve Clayton - Fund Manager

4 May 2018

The UK stock market saw a strong recovery in April, driven by improved economic confidence after the USA seemed to backtrack on its threats of trade wars and a sharp bounce in energy prices helped propel commodity shares higher.

Oil shares rose by an average of 13.3%, as Brent crude oil jumped from $67 per barrel to almost $75. Larger companies delivered a stronger performance than mid-cap and smaller companies over the month, which is largely a result of the heavy representation of BP and Shell in the FTSE.

Fund performance

The fund delivered a return of 5.8% during the month. Yet overall, the fund still lagged the market by 0.6%. This was a remarkable month. The top 5 negative contributors were in fact the only negative contributors last month, every other holding outperformed the market.

The reason we lagged the market was the performance of the stocks that we did not hold. We do not hold any commodity producers, which cost 1.7% from the fund’s performance. So even though most of our stocks performed well, as a pack, they could not quite keep up with the market.

On the positive side, consumer stocks added 1.2% to the fund’s relative performance during the month, whilst our technology holdings added a further 1.7%.

As we’ve mentioned already, this month we compare performance of the biggest positive and negative stocks by their relative contribution to the fund’s return* but remember these details are over a short period of time and past performance is not a guide to future returns.

*Relative contribution: The best way to explain this measure is with an example from April. BCA Marketplace went up by 17.7% in the month. Through the HL Select UK Income Shares fund, you have a 4.2% position in this company but if you had invested in the UK Stock Market (FTSE All-Share index) instead, you would only have a 0.06% position in BCA. The difference between these weightings, multiplied by the company’s performance, is BCA’s relative contribution to your return.

Biggest positive and negative contributors

Stock	Relative contribution %	Stock	Relative contribution %
BCA Marketplace	+0.67%	Sanne Group	-0.38%
Green King	+0.38%	HSBC	-0.06%
Fidessa	+0.37%	Reckitt Benckiser	-0.05%
Domino's Pizza	+0.34%	Xafinity	-0.03%
Legal & General	+0.31%	Sage Group	-0.01%

Past performance is not a guide to the future. Bloomberg 01/04/2018 – 30/04/2018

BCA's performance came on the back of a very confident trading update from the company and after a period of weakness that gave it plenty of scope to bounce on receipt of good news.

Similarly, Greene King gave a robust account of itself in its own trading statement, allowing the shares to recover some lost ground.

Domino's Pizza delivered a strong like for like growth result in its Q1 trading update sending the shares higher.

Legal & General benefited from strength in Life Assurance stocks generally during the month, along with a broadly positive response to its own full year numbers announced in March.

Fidessa gave a further positive contribution to the fund after Ion Capital disrupted the previously agreed merger with Temenos, making a higher offer, worth a total of £39.50 per share which has now been recommended by the Board of Fidessa and is expected to complete around the half year stage.

Sanne Group's weakness came on the back of a placing of shares by some of the group’s senior management. Their most recent trading update, coming with full year results in February was very positive we felt, showing strong initial contributions from the acquisitions the group has made in the last two years.

Annual percentage growth
	Apr 2013 - Apr 2014	Apr 2014 - Apr 2015	Apr 2015 - Apr 2016	Apr 2016 - Apr 2017	Apr 2017 - Apr 2018
HL Select UK Income Shares	n/a*	n/a*	n/a*	n/a*	-2.7%
FTSE All-Share	10.52%	7.48%	-5.69%	20.14%	8.16%

Past performance is not a guide to the future. Source: Lipper IM to 30/04/2018.

*Full year performance data not available

View portfolio breakdown

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for more information. Unless otherwise stated performance figures are from Bloomberg and estimates, including prospective yields, are a consensus of analyst forecasts from Bloomberg. They are not a reliable indicator of future performance. Yields are variable and not guaranteed.