Jeff Harris and Adam Khanbhai have been managing Strategic Equity Capital’s (SEC’s) portfolio jointly since February 2017. Since this time, NAV growth has been solid (a total return of 14.3%, which is broadly in line with the MSCI UK Small Cap Index’s return of 14.1%) but SEC has strongly outperformed during the last year, returning 2.3%, while the index fell 5.8%. Despite this, SEC’s discount to NAV has remained stubbornly wide…. read more
The managers continue to follow their all-weather investment process, maintaining a concentrated portfolio of companies that they believe are high quality, economically resilient and will benefit from long-term structural growth. The managers use private equity-style valuation techniques to identify strategically valuable and covetable assets with undervalued cash flows. M&A has been a significant feature of SEC’s portfolio and, with private equity dry powder at record levels (see pages 5 and 6), the managers see strong potential for takeovers of portfolio companies at marked premiums to their current market values. Irrespective of this, they are confident and optimistic about the prospects for SEC’s underlying holdings and see the above-mentioned discount as a further opportunity for investors.
Focused UK small companies portfolio
SEC aims to achieve absolute returns over a medium-term period, principally through capital growth. SEC is managed with a focused portfolio of investments selected on the same basis that a private equity investor would use to appraise its investments.