Oryx International Growth (OIG ) manager Chris Mills is pinning hopes of a recovery on what he describes as an ‘emerging silver lining’ of the US tariffs: namely, growing investor interest in undervalued UK shares. 

‘One unintended consequence of the president Donald Trump’s actions is the beginning of capital repatriation to UK and European markets as pension funds, historically overweight the US, de-risk their exposure,’ explained Harwood veteran Chris Mills and his team, covering the trust’s results for the year to the end of March.

Their comments follows a challenging period for the £171m portfolio of UK and US smaller companies. It reported a 2.4% fall in net asset value (NAV), while its shares were down 6.6% over the 12-month period. 

While the first half delivered a promising 6.5% NAV gain, the team said performance had been dragged down in the second half by a combination of domestic and global macroeconomic headwinds.

At home, increases to the minimum wage and National Insurance, coupled with reduced tax incentives for Alternative Investment Market (AIM) companies ‘hit the sector hard,’ the managers said. 

Elsewhere, investor uncertainty over Trump’s policies during his second term provided another blow to market confidence.

OIG’s share price dropped 5% in the week that followed the first round of US tariff announcements but has since rebounded 18%.

Even though OIG’s discount widened during the year and currently stands at 33%, the board did not to utilise their buyback authority for up to 10% of shares. No shares were repurchased during the year, which may seem surprising for a trust that is run by an activist investor. 

Though the UK IPO market remains subdued, the trust noted tentative signs of revival, with investment banks ‘attempting to time the market recovery’. The team pointed to the high volume of takeovers in recent years as ‘clear’ evidence that UK plc looks undervalued.

Performance drivers

In spite of a challenging backdrop, OIG reported strong gains from two of its top holdings: British medical device maker NIOX Group, up 19% over the period, and Hargreaves Services, up 24% including dividends. 

However, a planned takeover for NIOX, which would have returned £28m in cash, was scuppered by ‘macroeconomic uncertainty’, Mills and his team said. 

Shareholder engagement remains a core pillar of OIG’s strategy under Mills, who also runs the activist trust Achilles (AIC ) and top-performing North Atlantic Smaller Companies (NAS ). 

OIG’s direct involvement in Carr’s Group’s strategic review during the year helped to facilitate the £75m sale of its engineering division, with Mills pushing for ‘a clear path to capital return and a leaner structure’ – which are both underway. 

Elsewhere, the trust increased its stake in data management firm Restore Group, nearly doubling the position. It also boosted a holding in veterinary services provider Animalcare Group. 

The unquoted portfolio also contributed to performance; the sales of iEnergiser and GYG had a combined uplift of 133%.

Meanwhile, Harwood said a new private investment in real estate investor Maple Investment Group is ‘performing in line with expectations’. 

The managers also defended the disappointing performance of a number of stocks in the portfolio, calling share price falls ‘unwarranted’. Fluid power distributor Flowtech was singled out as suffering from sector-wide industrial order delays. 

Mills still has a substantial personal stake in Oryx, with $4.6m (£3.3m) in the trust directly. He has profited from a 493.8% NAV return over the last 15 years.