Performance, Commentary & Portfolio

Fund Manager’s Review

On 2 April (‘Liberation Day’) President Trump announced the most sweeping tariff hikes since the Smoot-Hawley Tariff Act, the 1930 law best remembered today for triggering a global trade war and deepening the Great Depression. He believes these tariffs are necessary to correct decades of China and the World Trade Organisation (WTO) creating and tolerating barriers to American goods overseas, leading to America’s persistent trade deficits and the demise of its manufacturing sector. Whilst there is probably some truth to some of these beliefs, they also ignore the domestic benefits of free trade, namely, cheaper goods for American consumers. Ultimately, tariffs are a form of tax that will make all manner of goods more expensive.

Many believe these tariffs are merely an opening negotiating gambit to achieve broader trade-related and geopolitical goals. If so, they have to be believed to be effective. Subsequent changes to the initial proposals have been erratic, unnerving markets and negatively impacting confidence; both businesses and consumers find it hard to plan when the rules keep changing.

US market underperformance continued during the month. In Sterling, the S&P500 fell 4%, having recovered substantially from larger falls at the start of the month, whilst more modestly valued European indices rose slightly. The Brunner Investment Trust performed broadly in line with its benchmark.

The Net Asset Value (NAV) total return for April was -2.53% versus -1.80% from the benchmark index. Our UK listed holdings aided performance. Online second-hand car marketplace Auto Trader was the single biggest contributor whilst Baltic Classifieds (the equivalent to Auto Trader and Rightmove in the Baltic states) also performed very well. These are very profitable businesses with strong market positions and decent growth unrelated to the economic cycle, perfect investments for uncertain times. Admiral Group (car insurance company) has similar characteristics and also performed well.

On the other side of the ledger, UnitedHealth, the American healthcare giant, reported an uncharacteristically weak set of numbers. The explanations provided by the company are complex. We reduced our holding last year, concerned that the company relies increasingly on the US Government for business. This makes pricing negotiations more opaque, and the business harder to understand. Our remaining position is under review.

We started one new position during the month in Tesco PLC. Tesco is the market leader in UK grocery with approximately 28% market share. This scale brings benefits in procurement and overheads that enables a margin slightly higher than peers. The market is competitive but stable. The rise of the discount retailers such as Aldi and Lidl, appears to be tapering off whilst Morrisons and Asda are struggling. Tesco are executing well, successfully balancing price, quality and service to broaden their appeal and win share. Whilst growth is likely to be modest, the company generates plenty of cash and is able to return it to shareholders thanks to a much-improved balance sheet.

The purchase was funded by the sales of our small position in Abbvie, the American biopharmaceutical company. Two of Abbvie’s leading drugs, which are driving growth at present, lose patent protection early next decade leaving a large void to be filled. By looking ahead further than most other market participants we believe we have greater insight into what the company is truly worth. 

Julian Bishop & Christian Schneider
16 May 2025

This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.

Awards & Ratings