It has been a happy ten months for UK small caps, with the FTSE Small Cap index +15.5% year to date. With this in mind, we were not surprised to see a slight pullback in markets during the autumn.

We continue to believe that the UK economy will recover from the depths of 2020 and that quality businesses are well placed to benefit from this tailwind. There will, of course, be bumps along the way, but the direction of travel is overwhelmingly positive.

We wrote at length last month about video game developer Frontier Developments and peer review platform Trustpilot, both new names to the Fund that have exciting growth opportunities ahead. We added further to each investment during an otherwise quiet month for portfolio activity.

With COP26 ongoing in Glasgow, we thought that now would be a good moment to celebrate the progress we have seen from some of our companies towards better environmental standards, while also highlighting where there is room for improvement.

We spent an afternoon last week with the management team of antibody creator Bioventix and saw a demonstration of a new rapid test that they are developing. This detects harmful levels of the pollutant Pyrene in the urine of those working in heavy industry. If successful, this test could materially improve the respiratory health of workers across the world, not to mention help factories to pinpoint the source of harmful emissions much faster than current methods allow.

Our favourite mixers business, Fevertree Drinks, have set targets to materially reduce their emissions, looking to be net zero in all regions by 2025 – that is the kind of assertive goal that we are looking for in our investments. Fevertree Drinks employees also planted London’s first ‘tiny forest’ in the shadow of the BBC building in White City, hopefully the first of thousands soon to pop-up across the UK.

Kettle controls manufacturer Strix launched its “Sustainable. Innovative. Dependable” strategy which outlines the internal management and reporting structure of their KPI’s in this area. For 2021/22 this is climate change and carbon emissions with clear targets set to meet net zero by 2023. This contrasts to one of our investment management peers (who shall remain nameless) that recently announced their target to be net zero by 2050 or sooner – could have done better. Individual accountability is crucial in investment (and life!) and we can comfortably say that the person or committee that signed off this latter target will not be there in 29 years to face the music.

This is just a small snapshot, but we are encouraged that businesses are becoming increasingly open in their environmental standards and we welcome management teams that are open and honest in both their shortcomings as well as their achievements in this space.  We have always engaged actively with the management teams of our investee companies and will continue to do so with ESG in mind.


The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.

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