Acorn Income Fund Limited
Fund manager insight

29 February 2020

Smaller companies portfolio

Fund managers’ comments

  • The Acorn equity portfolio recorded a total return of -11.8%, compared to the benchmark Numis Smaller Companies (ex. IT) Index, which registered a total return of -9.5% over the same period. UK equity markets fell sharply during the month, as investors became increasingly concerned about the potential impact that the spread of Covid-19 virus could have on global economic activity.
  • A handful of shares generated a small positive total return during February, including Warpaint London, STV Group, Flowtech Fluidpower and Clipper Logistics. Warpaint London reported that trading for its financial year ending 31 December 2019 was in line with management’s expectations.
  • The largest detractor from performance was Goodwin, costing -0.7% in portfolio performance terms, despite an absence of company specific news flow. Other detractors included Hostelworld Group and Secure Trust Bank, costing -0.7% each in respective portfolio performance terms. Neither company made a notable announcement during the month.
  • The holding in Flowtech Fluidpower was fully exited in February

Simon Moon & Fraser Mackersie

Income portfolio

Fund managers’ comments

  • The Coronavirus is threatening to turn into a pandemic impacting China, South Korea, Iran and Italy in particular so far. As Governments begin taking precautions to limit the virus, supply chains and consumer demand are likely to face disruption of an unknown quantity.
  • Despite their already rich valuation, Core Government bonds have been benefitting from rising concerns and yields have fallen to all-time lows. The portfolio has some exposure to UK Gilts and some U.S Treasuries which have appreciated, as investors price-in the potential for drastic rate cuts to support the economy in the event of the situation deteriorating rapidly.
  • Meanwhile, there still appears to be high degree of complacency in credit markets and although credit spreads have started to widen, valuations have been masked by the offsetting impacts of the fall in government bond yields. We feel there is further widening to come and continue to prefer to be in shorter-dated bonds, staying clear of longer duration instruments issued by more cyclical issuers which could be most impacted by a sudden growth shock.
  • The positions in Real Estate Investors and Supermarket Income REIT were reduced after strong performance but were ultimately were detractors to performance, as share prices came off late in the month as market risk appetite fell.
  • Hadrian’s Wall Secured Investments was a positive contributor, as the share price moved higher following the announcement that the board would propose to put the company into managed wind-down.


Chun Lee & Robin Willis



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