Strong Performance Driven by Active Management

The fund continued to have an active year, with three names cut and three new names added.

Continuing to lead the way was Raspberry Pi, which was up 174% over the first half of the year. The ‘at-home’ chip maker continued to benefit from the rise of personalised agentic AI and sales continued at pace. We continued to trim the holding throughout the quarter and most recently at £10 (it started the year at £3). Also in tech, Softcat, continued to perform well and had a strong second quarter with results in May that reaffirmed the broad-based demand and large project wins from enterprise software and AI as well as an upgrade to guidance.  

Reallocating Capital Towards Higher-Conviction Opportunities

However, it wasn’t all gung-ho in UK small-cap tech. We sold DotDigital after continued underperformance alongside its peers in the software sector. In a sector that is ripe for AI disruption the SaaS and email marketing consultancy continued to feel downward pressure, so we exited to deploy funds elsewhere, including GB Group. We last held the firm in 2021 and reinitiated in June, after a profit warning which kitchen-sinked a hefty one-off loss, impacting near-term margins. We believe this one-off investment will unlock higher growth and margin expansion and was an excellent opportunity to buy back in. The firm specialises in identity verification, fraud prevention and location intelligence; preventing digital crime while onboarding customers. 

Another of these new holdings for the portfolio is James Fisher & Sons, a company we have been long acquainted with and re-met several times over the past six months. The British marine engineering (decommissioning and maintenance of energy infrastructure) and defence (submarine rescue systems and specials services stealth insertion vessels) firm have had a tough few years, but after meeting management and their capital markets day, we initiated on a good valuation and clear strategy for the business. In defence we also added to Chemring Group, the Hampshire based countermeasures (e.g. flak) specialist, in May. They are the largest supplier to both the MoD and the US Department of Defence. 

Maintaining Discipline Through Portfolio Changes

Finally, we sold Bellway and Rathbones from the portfolio. Despite all the mandates and rhetoric from the government, homebuilding hasn’t been a success, and Bellway has been stung and languished from this failure of policy implementation. We also sold Rathbones after they came to market agreeing to a voluntary requirement (VREQ) regarding its client onboarding and inflows of their most sophisticated high net worth clients.  The FCA-prompted skilled person review uncovered areas for improvement within Rathbones' UK wealth management business, specifically regarding compliance oversight and the implementation of Consumer Duty. Having seen these before in our industry, (where the FCA has to sign off on individual client take-ons) we know the timeframes involved so exited the position. We topped up Pollen Street Capital and OSB Group with the proceeds. 
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.