Stock markets responded positively to the political agreement research to raise the US debt ceiling. The FTSE All World index gained 5.7%. There was some broadening of the market rally and it was not just those stocks exposed to the current in vogue theme of artificial intelligence that performed well. Factor analysis indicates that lower quality and more volatile stocks performed were amongst the best performing area of the market.

The Global Equity Growth fund (I class USD) gained 4.7%. Align Technology’s share price recovered 25.1% to close to April highs, probably due to optimism over Chinese case numbers. Patterson (+22.9%) saw an increase in share price following an announcement by OPEC to reduce production which raised oil prices. While the empirical relationship of these share prices of oil services companies to the crude oil price is well understood, fundamentally little has changed for the firms who remain at close to full fleet utilisation in an industry that has had structural underinvestment.  The Match Group share price responded positively to the launch of Archer, a dating application for aimed at gay, bisexual and queer men, providing a 21.3% gain for the month.

The fund’s smaller capitalisation stocks performed poorly in June. Autolus Therapeutics share price fell 23.5% giving back around half of May’s gain following the positive clinical trial data for their most advanced therapy obe-cell (AUTO1) presented at major conferences. During June the firm continued to provide positive news for a product at an earlier stage of development AUTO4. The company’s clinical trials remain running which should enable the firm to continue to provide updates on the duration of response from patients that have received their treatments. Unusually regulators have been heavily involved in clinical trial design and we anticipate a smooth pathway to obe-cell’s approval which ought to drive substantial upside to the share price. After the positivity from the sequencing company’s two day show case event in May the fund’s smallest position in Oxford Nanopore declined 19.1% during the month. The company continues to experience explosive growth and, perhaps is responsible for some of the turmoil at the world’s current largest dominant sequencing company Illumina. L’Occitane International share price declined 10.4% with the firm announcing surprisingly weak headlines earnings. Looking in depth at these, underlying results were good but some non cash impairments came as a surprise, as did guidance regarding margins for the forthcoming year. Management has decided to invest heavily in building their brands and hence has lowered margin expectations, while raising revenue growth targets. We continue to believe the firm is substantially undervalued.

Trading activity was modest.

We have received several inquiries questioning our exposures to artificial intelligence. We have been aware of the emergence of many aspects of the technology and the fund continues to have exposure both to direct users of the technology, as well as suppliers of some of the building blocks. There have been many examples of new technology catching the interest of investors historically. While there is now general awareness of the benefits that AI can offer, we do not believe we are yet at fever pitch “bubble” levels of valuation in the space.