SVM UK Opportunities

SVM UK Opportunities is a unique and pragmatic stock-pickers fund. The team has the flexibility to invest across the market cap spectrum in the UK and, while the fund has a value tilt, it is not beholden to a fundamentalist value philosophy - the manager will invest in growth stocks where he sees opportunity.

Our opinion

This fund is a hidden gem in the crowded and highly competitive UK market. It is a stock-picking fund led by an extremely experienced manager who has a great track record. SVM UK Opportunities has a solid process, built around fundamental equity research. Performance has been particularly impressive given the fund’s natural value tilt which has been a headwind over the past decade.

Fund manager

Neil Veitch joined SVM in 2006 and managers a number of strategies. Prior to joining SVM, Neil worked at Kempen Capital where he was responsible for mid and small cap investments in the UK. Neil has 24 years’ investment experience and is a CFA charterholder. He is supported on the fund by deputy manager Craig Jeruzal, who has 16 years’ industry experience.

Neil VeitchFund manager

Investment process

This is a go-anywhere fund, with a relentless focus on individual company research. The manager is very disciplined on valuation and the majority of the portfolio is usually made up of value holdings. However, Neil is not beholden to a rigid value philosophy, and he will invest in growth stocks when opportunities arise. The fund has three different buckets: value (40-80%) priced below the market; growth at reasonable price (10-40%) misunderstood growth; and high growth (0-10%). Neil will invest in high or low growth. What matters is the valuation and the net present value of the business.

Ideas come from a variety of sources including company meetings, screening and broker research. The team uses four different screens which can be used in isolation or used together and does not rely on sell-side research. Price targets are set for all holdings ensuring there is sell discipline. As a stock approaches a price target, the manager will sell the position and recycle the capital into higher conviction ideas.

The fund is long-only but has the ability to short individual stocks in rare cases. The manager takes a long-term approach with investments and targets outperformance over 5 years.

Diversification is important and the fund is broken down into seven baskets of stocks, with different underlying economic exposures. This allows Neil to easily see where the risk is being taken at a sector level and he can adjust accordingly.

ESG

ESG - Limited
Responsible investing is an important aspect of SVM and the service it offers to investors when managing funds. To this end, it will engage companies it owns where it believes it sees issues, with a focus on the areas where it believes its voice will have most impact. The primary objective of this fund, however, is capital appreciation. To achieve this, Neil has a go-anywhere approach meaning he doesn’t wish to rule out potential opportunities based on notional ethical standards. Obviously, Neil will not invest in stocks where he thinks risks posed by ESG will undermine the future of the company, but there aren’t strict parameters on what type of stocks he can or can’t own.

Risk

SVM does not use stop losses but a real time monitoring spreadsheet will alert the manager to any large changes in individual positions. The fund is reasonably concentrated in 40-60 holdings so there will be stock-specific risk. Each position will usually be initiated at between 1.5% and 3% with an absolute maximum position size of 7%. The top ten positions usually make up around half the portfolio.

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