Meet The Manager - Neil Hermon

Neil Hermon has managed the portfolio since November 2002, and his experience of managing UK Smaller Companies funds dates back to 1994. Neil was previously Head of Smaller Companies at Morley, where he managed the Norwich Union UK Smaller Companies OEIC (AA rated by S&P fund research). He describes his investment style as stock-picking with a growth bias.

Fund Manager's Commentary – January 2012

The UK equity market was up strongly in January after an abrupt reversal in risk appetite. With the market reassured by European banks’ healthy uptake of the European Central Bank’s (ECB’s) first longer-term refinancing operation in December, equities rallied, European peripheral sovereign debt yields fell sharply and the euro climbed against the US dollar. In this ‘risk-on’ environment, UK equities performed strongly, especially the more cyclically sensitive segment of the market. The FTSE All-Share Total Return Index rose 2.7%, with small and mid-caps outperforming materially, as the Hoare Govett Smaller Companies ex-Investment Companies Index rose 8.8%.

Positive contributors to portfolio performance included Spectris, a provider of electronic control and process instrumentation equipment, which rose 18.8% after it gave an upbeat trading statement and analysts raised their profit expectations for the year. International consulting engineer WSP rose 21.5% as the shares bounced back from an oversold position. Precision measurement and calibration equipment engineer Renishaw rose 38.7% after the company issued a positive outlook statement alongside in line interim results. Less helpfully, international contractor and support services group Interserve fell 9.4% as investors took profits after a strong performance in 2011.

We took a new position in Afren, the oil producer and explorer, as the company looks good value and has an exciting drilling campaign in 2012. We also added St Modwen, a property investor and developer, to the portfolio as its valuation looked extremely cheap and we felt the market was over-concerned with its debt profile. To fund these purchases we sold our position in Kalahari Minerals, after the company agreed to a takeover offer from a state-owned Chinese nuclear power company, and Advanced Medical Solutions, where strong performance from the shares had left the company looking fully valued.