The fund managers of Schroder British Opportunities (SBO ) have claimed the UK’s increasing economic certainty will help the investment trust capture gains on the sales of more of its unquoted smaller and mid-cap companies.

Schroders’ Tim Creed, Rory Bateman, Uzo Ekwue and Peraveenan Sriharan said the UK election had brought greater political certainty, boosting confidence in the private and public markets, while continued interest rate cuts would help.

They noted that small and mid-cap private exits have remained relatively stable compared with the levels seen in 2019 before the Covid pandemic, with deal volumes in the UK’s mid-market falling 11% in the first half of 2024 year on year, but a 25% increase on the first half of 2019.

‘We expect to see the increased economic certainty to provide improved market conditions and a favourable backdrop for future exits,’ they said.

The £80m portfolio of public and private companies saw its net asset value fall 2.4% over the six months to 30 September, driven by a 2.7% decrease in the private equity portfolio, interim results show.

Exiting its position in semiconductor firm Graphcore earlier in the year after it was bought by SoftBank did contribute to performance, but the valuations of Rapyd, Cera Care and Learning Curve were slashed, while currency movements also knocked returns.

Creed and Sriharan, who manage the private equity holdings, said that from an operational perspective, both global payments company Rapyd and digital-first home healthcare provider Cera Care continued to perform well.

Rapyd’s valuation was cut in line with the challenging backdrop for the payments sector leading several companies to lower their long-term growth outlooks, while education provider Learning Curve had seen a softening in demand.

Over the period, the pair bought Headfirst, an international human resources tech service provider operating in 15 European countries, and since September had bought Acturis, a provider of software for managing agents in the insurance market.

The public portfolio, which makes up 36% of net assets and is managed by Ekwue and Bateman – the latter retiring from Schroders in February – contributed to performance.

Shares in ventilation products provider Volution (FAN) rose after results showed stronger than expected growth, while luxury watch and jewellery retailer Watches of Switzerland (WOSG) gained after a reassuring trading update that maintained its year-end financial guidance.

Over the period, they bought cosmetics supplier Warpaint London and building supply manufacturer Forterra. They exited media company Ascential after Informa made a bid for the company.

Shares in the trust fell 2.5% over the period to 77.5p and have since fallen a further 7.7% to 71.5p, a 33% discount to their net asset value.

New chair Justin Ward said the board had not bought back any shares over the period, despite holding net cash, wishing to save liquidity for its investment pipeline and avoid shrinking an already small company.

‘Within the private equity market small to mid-cap exits have remained stable compared to 2019 levels with expectations that increased economic certainty will enhance market conditions for future exits. Over time, we anticipate that this should lead to a narrowing of the discount at which our shares are trading which continues to undervalue the company and does not reflect the strong fundamentals and trading progression of the underlying portfolio,’ he said.

Since launch exactly four years ago, the trust has delivered underlying returns of 11.2%, while the shares have tumbled 27.1%. Over the same period the FTSE All Share index has climbed 44.5%, according to Morningstar data.