Law Debenture Corporation PLC The Fund Data

In March, the Trust's underlying NAV (with debt at FV) before adjusting for the final dividend payment, fell 7.0%, underperforming the FTSE All-Share which fell 6.7%. It was a poor month for UK and global equity markets, as the conflict in Iran led to a sharp rise in oil prices, re-igniting fears of inflationary pressures at a time when inflation and interest rates had otherwise been heading downwards. The weakest performers in the portfolio during the month tended to be stocks most sensitive to interest rate expectations, such as commercial property and house building. It is rare to see such a fast reversal of interest rate expectations – having previously assumed roughly two interest rate cuts over the remainder of the year, the market instead began pricing in roughly three interest rate increases. Time will tell whether this new assumption proves to be correct. The UK labour market is weaker than it was at the time of the last commodity price increase (following the war in Ukraine). In our view this means there is less chance of a wage-price spiral, and therefore central banks may have reason to be more cautious than the market currently expects on interest rate rises. The best performers during March were commodity producers (such as BP, Shell and Serica Energy) as well as defence providers such as BAE Systems. From a transactions perspective, on share price weakness we added to a number of existing positions such as fund manager (and owner of interactive investor) Aberdeen, free-to-air broadcaster and content producer ITV, and car distributor Inchcape. These were funded by a full sale of the holding in Tesco, which had performed well and had re-rated to a higher than historic average valuation.

In March, the Trust's underlying NAV (with debt at FV) before adjusting for the final dividend payment, fell 7.0%, underperforming the FTSE All-Share which fell 6.7%. It was a poor month for UK and global equity markets, as the conflict in Iran led to a sharp rise in oil prices, re-igniting fears of inflationary pressures at a time when inflation and interest rates had otherwise been heading downwards. The weakest performers in the portfolio during the month tended to be stocks most sensitive to interest rate expectations, such as commercial property and house building. It is rare to see such a fast reversal of interest rate expectations – having previously assumed roughly two interest rate cuts over the remainder of the year, the market instead began pricing in roughly three interest rate increases. Time will tell whether this new assumption proves to be correct. The UK labour market is weaker than it was at the time of the last commodity price increase (following the war in Ukraine). In our view this means there is less chance of a wage-price spiral, and therefore central banks may have reason to be more cautious than the market currently expects on interest rate rises. The best performers during March were commodity producers (such as BP, Shell and Serica Energy) as well as defence providers such as BAE Systems. From a transactions perspective, on share price weakness we added to a number of existing positions such as fund manager (and owner of interactive investor) Aberdeen, free-to-air broadcaster and content producer ITV, and car distributor Inchcape. These were funded by a full sale of the holding in Tesco, which had performed well and had re-rated to a higher than historic average valuation.