Mercantile (MRC), the £1.8bn UK mid-cap equities investment trust run by JPMorgan’s Guy Anderson and Anthony Lynch, underperformed in the half-year to 31 July with its 6% investment and total shareholder returns both trailing the 7.2% return from the FTSE All-Share excluding the top 100 blue chips and all investment trusts.

Performance was bolstered by strong returns from Serco, the government outsourcer, Dunelm, the homewares retailer, and Plus500, the online trading platform that the fund managers added to the portfolio last year.

However, these gains were partly offset by a slump in Bytes Technology after the reseller issued a profit warning soon after full-year results following a sales team reorganisation and weakening customer demand, while 4imprint, the supplier of promotional branded merchandise that is Mercantile’s largest holding, fell on US tariff uncertainty clouding the outlook.

Housebuilders Bellway and Barratt Redrow also disappointed as a long-awaited recovery in housebuilding activity remained elusive, the investment managers said.

Nevertheless, the company pointed to its record of beating the benchmark over three, five and ten years. Anderson and Lynch also highlighted their use of 15% gearing, or borrowing, as evidence of their optimism.

Despite the well-known headwinds to growth and caution heading into next month’s Budget, portfolio companies, they said, were “mostly performing well, and yet the valuation of the UK market remains at a marked discount to both its own history and relative to other developed markets.”

A second quarterly dividend of 1.55p was declared taking the total for the half year to 3.1p, up from 3p a year ago.

The shares firmed a penny to 246.9p at a 10% discount to net asset value.