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Gresham House Strategic continues to see value in UK

Gresham house strategic GHS

Gresham House Strategic continues to see value in UK – The UK smaller companies, focused private equity style, fund, Gresham House Strategic (GHS), published its audited financial results for the year to 31 March 2019, this morning. We covered the leading return figures when the unaudited results were released in April (click here to access) so instead use this opportunity to refer to the manager’s outlook. Private equity as an asset class continues to raise considerable capital, as general partners look to raise late cycle funds.

Opportunities remain in an ‘expensive’ market

We note that GHS delivered an NAV total return of 8% over the year. The following extract is taken from the manager’s report accompanying the results announcement.

“We enter the 2019/20 financial year invigorated from a year of significant activity and accelerating NAV performance. We are excited to be continuing to make progress in spite of some of the setbacks and to be capitalising on selective opportunities ahead of us, some of which we have discussed in this report. Other opportunities remain in our investment pipeline and we look forward to being able to discuss these with shareholders in due course via our factsheets.

While we continue to believe areas of equity markets are expensive compared to historic ranges, opportunities remain, and the UK is attractively positioned on a value basis relative to other economies and markets. We feel this creates opportunities for our existing holdings and new investment ideas in the medium term, especially given our ‘value’ orientation. Whilst wary of the stage in the cycle and some sector valuations relative to historic ranges, we remain cautiously optimistic in our outlook for the shorter term, especially when focusing on the UK. If a resolution to the Brexit uncertainty can be found, as we continue to believe it can (albeit after some additional dramatic posturing from both sides), then the case for UK equities is even stronger. In the event of a Brexit resolution we would expect to see an improvement in consumer confidence (helped by a likely stronger UK currency) as seen in the US over the past six months, and an element of catch up from withheld capital expenditure by businesses during the last two years of uncertainty. Whilst this may be offset by a reversal of the recent stock-building which has supported growth ahead of the Brexit deadline, we believe the overall impact would be positive. We are following developments closely and are engaged with our portfolio investments on their plans either way.

All of this considered, we are selectively assessing interesting, differentiated value opportunities, particularly those that offer defensive characteristics against a potential slowdown in global economic growth should trade wars escalate, and those that are not highly-rated momentum stocks, several which have been propelled to lofty valuations during the current bull market. The sell-off at the end of 2018 provided a helpful reminder of the risks of such valuations.”

GHS: Gresham House Strategic continues to see value in UK

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