- A focus on small, domestically-focused UK businesses held back performance following the EU referendum
- The manager took the opportunity to add to favoured investments at cheaper prices
- Long-term returns have been driven by good stock selection
The UK's vote to leave the European Union created much uncertainty. The UK stock market fell in the immediate aftermath of the vote, although there was a marked difference in the performance of small and larger businesses. Higher-risk small and medium-sized companies, which are more exposed to the health of the UK economy, saw their share prices fall sharply. However, the share prices of the UK's largest firms, which derive a greater proportion of their earnings overseas, fell to a lesser extent.
The MFM Slater Growth Fund's bias to smaller businesses proved a strain on its performance. In the days following the EU referendum the fund fell 12.3% compared with a loss of 7.7%* for the average fund in the IA UK All Companies sector. This is, however, over a short timeframe and is not a guide to how the fund will perform in future.
|Annual percentage growth|
| July 11 -
| July 12 -
| July 13 -
| July 14 -
| July 15 -
|IA UK All Companies||-4.9%||21.7%||13.7%||7.0%||-2.6%|
|MFM Slater Growth||-8.0%||15.4%||36.6%||17.6%||-6.4%|
Source: Lipper IM to *01/07/2016.
Past performance is not a guide to future returns.
Investments in a number of property and construction-related companies, including Bellway and Redrow, were particularly damaging to performance. Other domestically-focused firms such as Restore, which provides document management and record storage, and Essentra, which provides plastic and fibre products, proved painful.
On the other hand, US company Walt Disney performed well over the period (the fund has the ability to invest up to 20% overseas), as did other globally-focused businesses, such as healthcare group Hutchison China MediTech.
Mark Slater, the fund's manager, believes many of the companies he invests in have been unfairly dismissed due to their focus on the UK market. Their longer-term prospects remain unchanged, in his view, and he has not made significant changes to the portfolio. He has, however, taken the opportunity to add to favoured holdings at cheaper prices, particularly UK businesses he believes will prove resilient over the long term, as well as overseas earners offering niche products or services.
Mark Slater spends his time analysing the long-term prospects for individual companies rather than the short-term impact of unpredictable wider economic issues. He demonstrates real conviction by investing in a concentrated portfolio of his best ideas, meaning each holding can have a significant impact on performance.
We have long held the view that combining investment in small and medium-sized companies with such a concentrated approach makes the fund a higher-risk proposition and would expect it to go through periods of underperformance. Shorter-term performance could be volatile, however, Mark Slater has delivered strong long-term returns for investors aided by good stock selection, according to our analysis.
The fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors. While we believe long-term, patient investors will be rewarded by Mark Slater's stock-picking ability, we feel we already have a strong line-up of managers focused on small and medium-sized UK companies on the Wealth 150.