UK markets responded well to Boris Johnson and Ursula von der Leyen finally agreeing to a Brexit deal, with the FTSE All Share rising +3.7% in December and the more domestically-focused FTSE Small Cap and AIM indexes up +6.2% and +10.1% respectively. Drilling-down into this performance, it was notable that the more cyclical sectors, such as Mining, Leisure and Financial Services, were the top performers. The only two sectors in negative territory for the month were Consumer Staples and Pharmaceuticals, both sectors that traditionally are seen as more ‘defensive’ and that tend to get left behind when the wider market is roaring ahead.

During the month, we added one new investment to the Fund, but the majority of our activity was adding to existing positions as we still see plenty of attractive value on offer. Our new investment is in translation services provider, RWS Holdings. We have followed RWS for a number of years and always regarded it as a high quality business, benefiting from the structural tailwind that there is a seemingly ever-growing quantity of legal, medical and technical paperwork that needs translating into multiple languages. RWS has an impeccable record of organic and acquisitive growth and we took the opportunity of market scepticism regarding their recent acquisition of rival SDL to initiate a position – we are more optimistic about the acquisition than the market.

Within our existing holdings, and thanks to steady inflows, we added to a number of more UK-focused companies, namely Berkeley Group, Hargreaves Lansdown, Derwent London and Shaftesbury. We feel shares in these companies are being incorrectly discounted for their UK exposure, with investors overlooking the long-term quality of the businesses. To take one example, Berkeley Group delivered 10% of all new homes in London last year and has £1 billion of cash on the balance sheet, plus £1.9 billion cash due on forward sales coming in over the next three years. Brexit or no Brexit, the fact is that there is a material shortage of new homes in London and there is nobody to rival Berkeley when it comes to experience building in London and investment firepower.

We also added to our Anglo-Dutch titans RELX and Unilever, which look cheap to us on all metrics and, within our overseas equities, we topped-up old friend Roche and had a chance to increase our position in L'Oréal that we initiated back in March 2020. Hopefully, there will be plenty more chances to add to L'Oréal in 2021 as we would like for this to be one of our larger positions within the Fund.