The fund deliberately launched into the UK small-cap sector, one of the most unloved and undervalued parts of the global market. The core thesis is that this widespread neglect creates significant opportunities to find 'gems amongst the rubble'—world-class companies trading at a deep discount.
The investment style is described as 'brutalist'—concentrated, active, and energetic. This involves taking significant positions in a small number of companies and actively engaging with management to unlock value, rather than relying on broad market movements.
The discussion emphasizes that the UK market's cheapness is a persistent problem driven by political uncertainty and a lack of supportive policy. Hulst argues that without structural changes, such as a properly implemented 'Brit ISA' to incentivize domestic investment, the valuation discount will remain.
The fund employs a unique process for finding ideas, including using cash-flow modeling tools in reverse to find underperforming businesses with potential. A key innovation is the use of an AI tool to automatically screen all daily RNS announcements for specific phrases, saving hours of manual work and surfacing opportunities.
The fund is a small, recently launched investment trust with a relatively high 1.5% management fee and a 12.5% performance fee. The manager justifies this by positioning it as a specialist, high-performance product that will remain capacity-constrained to protect its strategy.
Keep pulling the thread on Lawrence Hulst.