Investec view: Strategic Equity Capital has released interims, which incorporate a detailed explanation of the philosophy, process and portfolio construction. We have summarised this below. Ken Wootton has been appointed Lead Manager and Gresham House has undertaken a detailed review of the portfolio. While there have been some changes to the portfolio, there has been no fundamental restatement of the investment strategy, although in order to better leverage the resources of the manager and maximise engagement opportunities, future investments will be focused on companies with a market cap between £100m and £300m. The past few years have been highly challenging for UK investors as Brexit has acted as a dragging anchor on performance and valuations, and with many global investors seemingly regarding the UK as a pariah. Meanwhile, the domestic focus of many smallcaps has been an additional millstone. However, Brexit is done and in recent months, we have seen tentative signs of inflows, attracted by historically wide valuation gaps relative to global equities, and we note an uptick in M&A activity. Additionally, a successful vaccination program has been a catalyst for investors to begin finally to look across to the other side of the valley and a potential 4-5% GDP rebound in both 2021 and 2022. After suffering strong headwinds for many years, this may be a fertile environment for Strategic Equity Capital. We believe that the inefficiencies of the UK smallcap market provides significant opportunities for active investment managers. Ken Wotton can demonstrate an outstanding long-term track record and the challenge now is to re-invigorate the fortunes of the company. If successful, we would expect superior NAV gains to be enhanced by a narrowing in the current wide discount, which contrasts starkly with the weighted average equity investment company discount, which is at historically narrow levels. An annual continuation vote should ensure that the discount is not embedded. New Portfolio Manager: Following on from Gresham House’s appointment in May 2020, Ken Wotton was appointed Lead Manager in September to work alongside Adam Khanbhai. The new lead manager can demonstrate a highly impressive track record of investing in UK-listed smaller companies. Over 10 years, the LF Gresham House UK Micro Cap Fund is ranked 4th out of 52 open-ended funds in the IA UK Smaller Companies sector, notably is the only fund to deliver an absolute NAV total return each year, and is beaten by just one investment company over this period. Continued overleaf