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Questions for Investors


When you are looking for someone to manage your money, you want to work with someone you can trust and who understands how the financial markets work. You want someone that understands how to balance risk with return. Accrue Investment management build trust from the start. We look at what assets you have and where your money should be invested, based fully on our understanding of your appetite for risk. We consider every option, balancing potential risks with potential returns.

• Are your investments achieving a good level of income?

• How have your investments performed over the last year?

• Would you like a free portfolio review?

We would like to know the answers to these questions so please get in touch:

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CF Woodford Equity Income Fund Update


August was a brutal month in equity markets, as the plunge in Chinese stock markets continued, spreading panic worldwide.

Early in the month, the Chinese authorities allowed the renminbi to devalue over three consecutive days. This caused concerns about currency wars and the prospect of deflation being exported around the world, and prompted fears that China’s economic situation could be much worse than previously suspected. Then, on 24 August, the domestic Chinese stock market suffered its biggest one-day fall for eight years, compounding its earlier losses and causing an immediate sell-off in global markets. Although most developed indices recovered some of their poise thereafter, all major markets fell in dollar terms over the month.

Although there were some powerful technical factors at play which may have contributed to the extreme volatility, the move lower was initially triggered by a sudden realisation by the equity market that the fundamental health of the Chinese economy and indeed the wider global environment were not as robust as valuations had been implying. That the Chinese economy is slowing has been no secret, however – recent quarterly growth figures have lacked credibility when compared with other real economic data. The problems in China are significant and further vindicate the cautious view of the global economy that we have held for some time.

Given our concerns about productivity, deflation, debt and the overall global growth outlook, we have built the portfolio on the expectation that it will receive little help from macroeconomic trends. In general, this strategy and our overall investment approach served the fund relatively well through the volatile conditions, although the portfolio was unable to avoid a decline in absolute terms.
Among the largest detractors this month were our large-cap tobacco and pharmaceutical holdings: British American Tobacco, Imperial Tobacco, AstraZeneca and GlaxoSmithKline. In a panic-driven sell-off such as that which we saw in August, it’s often the largest and most liquid stocks that get hit hardest first. We have seen no fundamental justification for the share price declines and we added to each of these holdings, and several others, during the market turmoil.

Our US biotech holdings were also hit hard. The month’s largest detractor was Northwest Biotherapeutics, after rumours that the clinical trial of its DCVax-L oncology treatment had been suspended. The company has confirmed that the suspension related simply to the recruitment of new patients and was a temporary measure while regulatory information was submitted, in line with clinical protocols. The trial is continuing and we see nothing untoward in this development. Alkermes and Prothena sold off heavily too – again, we have no fundamental grounds for concern and were able to take advantage of the share price weakness.

The most important positive contribution came from one of our unquoted holdings, Stratified Medical, which was subject to an independent revaluation. Stratified Medical is a technology company serving the global healthcare industry which combines human intuition with powerful algorithms to intelligently search and contextualise existing scientific research. When we first invested in the company in October 2014, the company had already identified and out-licensed two new potential targets for Alzheimer’s disease and had also successfully demonstrated the platform’s ability to identify other new prospective therapies. The funding round was intended to allow further development work on its technology platform to progress it towards ‘self-learning’.

Since then, the Alzheimer’s programmes have progressed extremely well, with the targets being successfully validated and initial milestones met. Furthermore, confidence in the platform’s broader capabilities is increasing, as is interest from the wider health care industry in this extraordinary technology. Consequently, the company has recently announced a further funding round which we participated in and the value of the existing stake has been independently uplifted to the new valuation. We continue to see considerable long-term growth potential in the business as it continues to develop and commercialise its very impressive intellectual property based around a unique partnership of artificial intelligence and healthcare innovation.

Elsewhere, Circassia performed well despite little in the way of news. The company’s share price strength may have resulted from its likely inclusion in the FTSE 250 later this month but investors may also be warming to the potential of its recent acquisitions of Aerocrine and Prosonix, which position Circassia as a world-class allergy and asthma specialist.

Several of our intellectual property commercialising businesses, such as Allied Minds, IP and Imperial Innovations, were also all among the top contributors for the month, with all of them bucking the general downturn in the market to produce modestly positive returns.

Our main portfolio activity in August focused on taking advantage of the indiscriminate share price falls that accompanied the market panic towards the end of the month. This allowed us to add to a number of existing holdings at incredibly attractive valuation levels.

We also introduced two new US health care positions to the portfolio in the form of AbbVie and Theravance Biopharma. AbbVie trades on one of the most attractive valuations in its sector despite also offering one of the fastest anticipated growth rates. This is in part explained by fears about the future of Humira, AbbVie’s treatment for auto-immune conditions such as rheumatoid arthritis, Crohn’s disease and ulcerative colitis. Humira is the biggest selling drug in the world and continues to grow quickly but is due to come off patent soon. The valuation discounts an immediate threat to the franchise once the patent estate starts to expire, but we believe that this significantly underestimates the extent to which AbbVie can protect the Humira franchise through further innovation and overestimates the probability that generic ‘biosimilars’ can be launched. Theravance Biopharma, meanwhile, is an earlier stage biotech business with one on-market drug (a new antibiotic for difficult-to-treat infections) and a very exciting clinical pipeline.

Cequr also joined the portfolio as an unquoted position. This Swiss early-stage business has developed a simple 3-day patch-like insulin delivery device for people with type 2 diabetes. The recently completed funding round provides Cequr with the capital to complete its clinical and regulatory requirements and commence commercialisation of the device.

We also continued to add to the holding in Essentra, the plastics and packaging firm, throughout the month. We know the business (it was spun out of Bunzl in 2005 and we were initially shareholders in both) and its management team well (we knew Colin Day, chief executive, for a long time as finance director of Reckitt Benckiser). Day and his team have achieved a lot in recent years, improving margins, increasing investment and reshaping the business through merger & acquisition activity. The shares have tended to perform well to reflect this transformation but recent under-performance has provided an opportunity to build a position at an attractive valuation level.

In terms of disposals, we reduced the position in Centrica which had held up relatively well in the early part of the market declines. We also reduced the position in Zegona and trimmed Royal Mail following its robust performance in recent months.
The views expressed in this article are those of the author at the date of publication and not necessarily those of Woodford Investment Management LLP. The contents of this article are not intended as investment advice and will not be updated after publication unless otherwise stated.

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Economic News

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Last week the Bank of England surprised observers by striking an unexpectedly dovish stance, apparently delaying a keenly anticipated interest rate rise until next year despite a strengthening economy. With the Bank downgrading its short-term forecasts for inflation, only one member of its nine-strong Monetary Policy Committee voted in favour of a rate increase, leaving an overwhelming 8-1 majority in favour of keeping borrowing costs at their current level of 0.5%. The rebound in second-quarter GDP “confirms weakness at the start of the year was merely temporary,” the National Institute of Economic and Social Research said in its quarterly review. June’s UK industrial production figures highlighted that the strong pound and weak overseas demand held back the manufacturing sector’s recovery in the second quarter.

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Questions for Investors


When you are looking for someone to manage your money, you want to work with someone you can trust and who understands how the financial markets work. You want someone that understands how to balance risk with return. Accrue Investment management build trust from the start. We look at what assets you have and where your money should be invested, based fully on our understanding of your appetite for risk. We consider every option, balancing potential risks with potential returns.

• Are your investments achieving a good level of income?

• How have your investments performed over the last year?

• Would you like a free portfolio review?

We would like to know the answers to these questions so please get in touch:

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The Price of Gold – 23rd July 2015


The price of gold closed below $1,100 for the first time in 5 years this week. Analysts once predicted that gold prices would surge to $5,000 an ounce, but now many are saying that the precious metal could fall back through the $1,000 mark before the end of 2015.

Here are a few reasons for the decline in price:

The strength of the US dollar

The US dollar has been gaining in value on the back of positive data on the economy. The value of the dollar typically has an inverse relationship with commodities. The reason for this is like other commodities, gold is priced in dollars on international markets. This means that when the dollar rises investors have less buying power and commodities become more expensive.

Interest rate rise

Another factor emanating from the US is the recent talk of an interest rate rise. The Federal Reserve has been dropping strong hints that it may increase the base rate sooner rather than later, and possibly in 2015. That will diminish the attraction of non-yielding assets such as gold. Since gold provides neither a dividend nor an income, there is an opportunity cost of holding the asset that may be worth paying in bad times, when interest rates are low and the gold price is likely to be rising. But, when markets are improving, interest rates are rising and returns are increasing, that opportunity cost starts to become less attractive.

Less negative news

Greece has stepped back from the abyss – at least for now. The global economy seems to be trundling along and Western countries are seeing a return to growth. An apocalypse predicted by many, which would have scared investors into assets such as gold, has not happened.

Technical trades

This last point is one often missed in analyses of any sharp market fall. Many trades are now executed on an automated basis, with software which is designed to buy or sell when a price hits a given high or low level to manage risk in big portfolios. Gold has reached the sort of low where the ‘stop-loss’ trades kick in, further fuelling a sell-off. The irony is that these programs are designed to limit risk exposure and losses when in reality they often exaggerate market swings and increase nominal losses.

Martin Badder ACSI
Investment Manager

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Macro Update – 17th July 2015


Greece’s parliament backed a slew of fresh austerity measures demanded by the country’s creditors, clearing the way for talks to begin on a fresh €86bn bailout package to prevent the country crashing out of the Eurozone. Mario Draghi, head of the European Central Bank, affirmed his faith in Greece remaining in the euro as the central bank raised its limit on emergency loans to Greek banks by €900m. “The ECB continues to act on the assumption that Greece is and will remain a member of the euro area,” Mr Draghi said. The ECB move prompted Athens to signal that its banks, which have been shut for two weeks, would reopen on Monday but Capital controls will remain in place. Athens received further relief when EU officials finalised a plan to provide €7bn in bridge financing to save it from defaulting on an ECB loan due on 20th July.

Markets were focused on the timing of interest rate rises. Bank of England Governor Mark Carney and policy maker David Miles flagged the prospect of earlier-than- anticipated UK rate increases as the economy improves. Federal Reserve chair Janet Yellen on Thursday said the US jobs market had moved demonstrably closer to a more normal state, a reason why the central bank is likely to raise short-term interest rates later this year.

UK retail sales saw some of their strongest annual growth in the past two years last month, boosted by warm weather at the end of the month and an early start to summer sales, an industry body said on Tuesday.

China’s economy grew 7% year-on-year in the second quarter, slightly better than analysts’ forecasts.

The Bank of Japan refrained from increasing its monetary stimulus even as it trimmed its inflation outlook, as officials count on the economy pulling out of a soft patch and consumer price gains accelerating toward its target.

Martin Badder ACSI
Investment Manager

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Monthly Roundup


In May, global equity markets provided positive returns, in sterling terms. In the UK, equities outperformed, thanks largely to the boost in sentiment following the surprise general-election result, which brought a Conservative majority to power. This smoother than expected political transition was well received by investors. Meanwhile, European equities were down in sterling terms amid intensifying concerns that Greece would miss the June deadlines for repayment to its creditors. Equity markets in the US made gains, helped along by the stronger dollar. Despite a downwards revision to the official first quarter GDP figure, from 0.2% expansion to 0.7% contraction, investors seemed to side with the US Federal Reserve, which attributed the weaker data to extraordinary factors like the harsh winter weather and lower oil prices. Elsewhere, emerging market and Asian equities were down for the month. Chinese equities were affected by bouts of profit taking, but there was strong evidence in the form of an interest-rate cut by China’s central bank – that the authorities would maintain their accommodative policy stance.

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FTSE100 Closes at a Fresh Record High

The US Federal Reserve’s cautious signal gave a boost to safe haven assets like gold

The FTSE 100 index of top stocks nudged above its record high yesterday, as a rush for precious metals propped up shares in London-listed mining companies.

Gold and silver, seen as safe haven assets, began to surge on Wednesday night after the US Federal Reserve struck a cautious note about economic growth.

Traders pointed to the Fed’s so-called dot plot, which showed that members of the central bank’s rate-setting panel expect a gentler pace of rate rises in the coming years. This can be read as a sign the world’s biggest economy will recover more slowly than expected, despite the Fed hinting that it will start to increase rates later this year.

“[T]he Federal Reserve suggested a less aggressive timeline for raising interest rates even as it opened the door for the first hike in almost a decade,” said David Papier, market analyst at ETX Capital.

This caution was echoed by Bank of England official Andy Haldane, who said a cut to interest rates was just as likely as an increase.

Gold spot prices were up 0.4pc to $1,172 an ounce by yesterday evening, building on gains made after the Fed statement. Silver prices rose 1.3pc to $16.16 an ounce.

The FTSE 100 index of blue-chip shares briefly touched a fresh intra-day high of 6,982.79 during morning trading, breaking a record set on March 2. The index then closed the day 17.12 points higher at 6,962.32, which beat the March 5 close. Until a month ago, the record level had been untouched since December 1999.

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Accrue Investment Management Meet Neil Woodford


Martin Badder went to meet Neil for a question and answer session about The CF Woodford Equity Income Fund. Here’s the latest fund round-up:

Last year’s challenges remained largely intact during the first month of 2015 with markets continuing to focus on falling energy prices and geopolitical tensions. The further decline in the price of crude oil set the tone for a volatile month, weighing on energy-related stocks and causing concern about the health of the global economy.

In the second half of the month, attention switched towards Europe following the Greek election of the far-left radical party, Syriza, which is committed to ending years of painful austerity. This potentially heralds a period of further political and economic uncertainty in Europe, where several other nations have seen populist parties gaining traction at the expense of more mainstream politics and substantially increases the risk of a Greek sovereign bond default. Elsewhere in Europe, Switzerland’s central bank unexpectedly ditched its peg to the euro, leading to an immediate and substantial surge in the value of the Swiss franc.

The eurozone is now in outright deflation and whilst many economists expect inflation rates to remain negative only temporarily, we are not so convinced. The threat of an entrenched deflationary mindset engulfing the eurozone appears significant enough to have finally convinced the Germans to reluctantly support a European Central Bank (ECB) programme of Quantitative Easing (QE). In turn, sovereign bond yields continued to decline, with UK 10 year Gilt yields falling to new lows towards the end of the month. 10 year Gilts are now yielding well below 2.0%, the proportion of UK stocks yielding more than Gilts has never been higher.


Athough this is a clear indication of the income attractions of the equity asset class, it is worth bearing in mind the reasons why bond yields are so low before becoming too enthusiastic. The bond market is evidently worried about the health of the global economy. Ultra-low sovereign bond yields reflect growing concern about the ‘Japanification’ of the western world, Europe in particular. In turn this would imply an extremely challenging trading environment for many businesses, and suggests investors need to be as selective as ever and focused on dividend sustainability, rather than headline yield alone.

One of the most dependable sources of dividend income for the equity investor is the tobacco sector, which features prominently in the portfolio. Over the last 25 years, the tobacco sector has an unsurpassed track record of delivering superior long-term total returns1 based on attractive starting yields and consistent, sustainable dividend growth. In January, our tobacco holdings performed very robustly, with significant contributions from Imperial Tobacco, British American Tobacco and Reynolds American, the latter assisted further by the strength of the dollar versus sterling.

Pharmaceuticals also performed well, with positive contributions from GlaxoSmithKline, AstraZeneca, Sanofi and a number of our smaller biotech positions. US biotech firm Alkermes was particularly strong, after two of its drugs – designed to treat clinical depression and schizophrenia – produced positive results in clinical trials. We view these positive trial results as potentially very significant developments and further evidence of the strength of Alkermes’ pipeline.

Allied Minds and IP Group also performed well – both specialise in the commercialisation of intellectual property and help to nurture early-stage businesses through to commercial success. The market is steadily warming to the long-term growth potential that exists within these businesses.

The largest detractor from performance was Drax, which continued to suffer from the government’s announcement in December that it is consulting on changes to its stance towards the support of biomass conversion projects. Although this is frustrating and disappointing, we remain convinced of the long-term investment case, given the quality of its management team, low valuation and the clear economic advantage of biomass compared to other sources of renewable energy. Drax’s shares recovered somewhat towards the end of the month after the European Union approved UK government support for a competitor’s biomass power station. We progressively added to our holding throughout the month.

Another significant detractor was Game Digital. The video games retailer issued a profit warning during the month, pointing to fierce competition during the Christmas period. This was disappointing, but one poor trading update does not undermine what we see as a strong long-term investment case. The shares fell immediately and sharply after the warning and we took advantage of this by materially adding to our holding at what we believe to be very attractive valuation levels.
We initiated a new position in P2P Global Investments during the month by participating in its C share issue. The company invests in online peer-to-peer lending credit assets and its proprietary technology system allows it to seek out the highest quality loans from a wide variety of platforms. The company looks well-placed to deliver a consistently attractive income stream to its investors.

We also added a new unquoted position to the portfolio during January. Novabiotics is a biotechnology company with two lead products in clinical trials: Novexatin is a topical (brush on) nail fungus treatment in Phase II trials partnered with Taro Pharmaceuticals; Lynovex is a treatment for Cystic Fibrosis also in Phase II trials. We believe Novabiotics is another great example of an exciting and innovative early-stage British business, based on excellent science and strong intellectual property, which offers the prospect of significant long-term growth should it fulfil its potential.

Elsewhere, we added active investment fund Crystal Amber to the portfolio during the month. This is a company that we have known well for a long time and we are very supportive of its investment approach which aims to deliver long-term value through active engagement with the companies in which it has invested. We hold its management team in very high regard.

We also added to a number of other existing positions including Spire Healthcare in an attractively discounted share placing, Utilitywise into share price weakness, Babcock International where a site visit helped to further build our conviction in the long-term investment case, and Centrica & SSE as further political interference caused renewed share price weakness in the energy utility sector.

We sold out of our position in Gagfah, the German real estate business during the month. Having received a bid from larger competitor Deutsche Annington in December, we took the opportunity to sell our holding. Another company subject to recent bid speculation is Smith & Nephew, which we also sold with its shares trading near all-time highs. Clearly, if a bid were to materialise, it could lift the share price higher still but we believe other opportunities now offer greater long-term income potential.

Source: Bloomberg

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Accrue Meet Neil Woodford

Woodford Funds ‏@WoodfordFunds 

Great interactive session with some key intermediaries today, including @Andy_Skerritts @MartinAccrue & @ParmenionUK


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When you are looking for someone to manage your money, you want to work with someone you can trust and who understands how the financial markets work. You want someone …
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August was a brutal month in equity markets, as the plunge in Chinese stock markets continued, spreading panic worldwide. Early in the month, the Chinese authorities allowed the renminbi to …
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