“The effects on the UK of back-to-back economic shocks, which caused the spike in inflation and forced the Bank of England to increase interest rates to the current rate of 5.25%, are beginning to dissipate quickly. CPI inflation in March 2024 was 3.4% (in September it was 6.7%). The sharp falls in energy prices have resulted already in a drop in food and core goods inflation. To date, the Bank of England has not reduced interest rates because of concerns over persistent inflationary pressures due to tight labour markets, wage growth and service price inflation.

“Recent comments by the Deputy Governor of the Bank of England suggest that the historic increases in energy prices were a more important driver of service price inflation than previously thought. Since the energy price component of inflation has fallen rapidly, it should lead to a more rapid fall in service price inflation in the near term. We will know more when the April inflation figures are announced in May. If it is the case, the only persistent inflationary effects left, all being equal, will be labour market tightness and wage growth inflation. Both have been on falling trends, but still too elevated in the view of the Bank. However, as headline inflation falls, inflation expectations diminish: an important driver in weakening pay growth expectations. In addition, high interest rates are impacting favourably on labour markets. These positive trends for reducing inflation are adding further weight to the case for cutting interest rates.

“Q1 is always a busy period for news flow, and the majority of the portfolio produced results or provided market updates. One portfolio holding, Impellam, announced in December 2023 that it had accepted an offer to be acquired by a Dutch rival for approximately £480 million. Corporate activity remains an important market and portfolio trend in 2024, as it was in 2023. More recently, Mattioli Woods accepted an offer to be acquired for £432 million by Pollen Street Capital, a private capital asset manager quoted on the Main List of the London Stock Exchange.

“Despite profitable growth for many AIM companies, their share prices have not recovered to pre-pandemic levels. Part of the reason has been persistent outflows from UK smaller company funds, necessitating sales of underlying companies in these funds, therefore keeping share prices low. In response, cash-generative businesses in the Puma AIM IHT model portfolio are buying back their own shares: a sign that valuations are too cheap. Further evidence is the continued trend of larger companies and cash-rich investors acquiring well-managed AIM companies at premiums to low valuations. On a more positive note, a number of portfolio companies are themselves making bolt-on acquisitions, using their own strong balance sheets to accelerate growth.

“High interest rates and the fall in energy prices are having the desired effect of taming headline inflation, while persistent inflation is on a much-improved trend. This has been at the necessary expense of reduced GDP growth, with significant headwinds for companies from high borrowing rates, cost inflation and subdued opportunities to grow. It should be noted that even when interest rates are cut, monetary policy will still be set to restrict the ability of the economy to grow more rapidly until inflation is fully tamed. Meanwhile, there are a number of companies that are in a good position to take advantage of a more positive environment when market confidence returns. By degrees, favourable tailwinds will develop and should be more apparent in the second half of 2024.”

In Q1 2024, the Puma AIM IHT model portfolio decreased by -1.91%, outperforming the FTSE AIM All-Share Index, which decreased by -2.63%, but underperforming the FTSE All-Share Index, which increased by +2.51%. Since inception in July 2014, the cumulative performance of the model portfolio has increased by +93.14%, outperforming both the FTSE AIM All-Share Index (-5.36%) and the FTSE All-Share Index (+20.50%)¹.

Puma’s AIM IHT Service seeks to offer investors the potential growth opportunities of a carefully selected portfolio of AIM stocks, combined with the benefits of IHT mitigation. The portfolio has an AUM of £201.3m and 93% of companies in the portfolio have a market cap above £100m.² 

Cumulative performance %

Discrete investment performance %

All figures correct as at 31 March 2024.

All performance data is quoted net of management and dealing fees and applies to actual initial investors’ portfolios that remain invested. Please note that performance data applies to the longest held, live portfolio which has been invested since inception, based on a portfolio managed directly by the Manager on its main trading platform. Performance data may vary for portfolios managed by the Manager on platform due to differing deal fees and other platform fees. Furthermore, small variations in performance may apply as each individual investor has their own discrete portfolio of assets. Discrete performance data is calculated as full-year periods from 1 January to 31 December of the year displayed.

Past performance is no guarantee of future results.

Date of inception: 1 July 2014.