Schroder UK Mid Cap’s (SCP) net asset value for the six months ending 31 March rose by 18.5%, ‘comfortably’ outperforming the company’s benchmark, the FTSE 250 ex Investment Trusts Index, which returned 15% over the same period.

The company attributed the rise to successful stock selection in the consumer discretionary sector, along with being underweight the real estate sector.

Robert Talbut, chairman said: ‘The UK stock market remains cheap relative to many other global markets on traditional valuation measures.

‘Given these clear valuation opportunities, it is unlikely that elevated interest from foreign buyers, such as private equity funds, will abate anytime soon, with domestically focused mid-caps being particularly attractive.’

Revenue earnings per share was 8.48p compared to 8.98p in 2022, while the fund’s net gearing for the six months ending 31 March 2023 was 8.8% versus 10.8% in the same period last year.

‘It is expected that the manager will continue to use this gearing to take advantage of attractive new investment opportunities and to participate in capital raising by portfolio companies,’ said the company.

The net gearing ratio is also known as a company’s debt to equity ratio and measures how much a company is funded by debt versus how much it is financed by equity.

Shares were up nearly 2% at 528p in morning trading, in contrast to its year-to-date performance – a fall of over 5%.

NEW HOLDINGS ADDED TO PORTFOLIO

Managers Jean Roche and Andy Brough have added new holdings including specialty chemicals company Elementis (ELM), following the disposal of its chromium business, and defence and nuclear services company Babcock International (BAB).

It has also bought a stake in British engineering company Senior (SNR), which the fund expects to benefit from ‘the ongoing recovery in the commercial aerospace sector’, and WH Smith (SMWH), as the fund expects to ‘see a continuation of resilient consumer spend (as opposed to other types of consumer spend which may now be reaching exhaustion, post the re-opening bounce)’.

The managers disposed of a stake in oil services company Petrofac (PFC) following news of the chief executive's departure, and their remaining holding in PZ Cussons (PZC).

Funds were reinvested in drinks maker AG Barr (BAG), providing access to the growing energy drinks market following the firm's acquisition of sports and drinks manufacturer Boost Drinks.

MANAGERS UPBEAT

Both managers have talked of the long-term potential for UK equities, adding that if investors are ‘willing to look beyond the ongoing negative headlines [they] will find the UK punches above its weight’.

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