Strategic Equity Capital

At the end of September 2020, Ken Wotton became the lead manager of Strategic Equity Capital (SEC) and, during the ten months since, SEC has provided NAV and share price returns that are significantly ahead of the MSCI UK Smaller Companies and even the broader MSCI UK Index (see pages 17 and 18). Despite this, and a comprehensive plan to reduce the discount (see pages 4 and 5), which now includes potential tender offers in both 2022 and 2024 (subject to certain triggers – see page 4), the discount to net asset value has reduced but is still material.

We do not think that this will persist and, with the decision to shift the focus of SEC’s portfolio towards smaller companies now bearing fruit (see page 9 for more discussion), combined with a UK market that is becoming increasingly investable for overseas institutions and attracting the interests of private equity buyers, now could prove to be a very good entry point.

SEC’s managers use a private equity style approach to managing public equity. SEC holdings, Equiniti and Proactis have recently succumbed to takeover bids and the managers think that there could be much more to go for in this regard.