Victoria Stevens

The final Alma Spotlight of 2023 introduces Victoria Stevens, a Fund manager on the Economic Advantage team at Liontrust Asset Management plc.

December 2023

As one of the UK’s leading investors in small to mid-cap tech, what is your view of the high levels of UK tech businesses going off market in 2023?

We assess every takeover on its own merit, but as a general point it is a shame to see some of our best businesses being taken out of the hands of UK equity investors at a period of what feels like such an extreme cyclical low. It is telling that so many of the acquirers are overseas (often US) private equity or corporates benefitting from the dislocation in valuations that has emerged over the past few years. It is entirely understandable that many PLCs will feel bruised and question why UK investors haven’t been more supportive, but there are factors on the other side to consider, such as portfolio risk limits or funding outflows. Selling shares, or not buying more, is often accompanied by an acute sense of disappointment but I think short term share prices are not reflective of what investors think of the underlying asset.

What do you think needs to change in UK capital markets to keep more of our brightest businesses listed?

I think the short-term demand picture has to change before thinking about supply side reforms. The issue now at the growth small-cap end is a self-fulfilling cycle of falling share prices, crunched valuations, driving poor performances from funds overweight in small and mid-cap, triggering fund outflows and consequentially a lack of capital to deploy and support holdings which investors feel are materially undervalued.

My view is that if UK equity market flows turn positive, it has the potential to catalyse an upward spiral. We are optimistic that 2024 can bring such a catalyst and in talking to our fund investors it does very much feel as if they understand the scale of the opportunity in UK smaller companies and that the question is ‘when’, not ‘if’, to allocate.

In addition to this, as a mentality, the market has become too focused on red tape at the expense of agility and flexibility that a thriving capital market needs at the small-cap end.

What are your three main pieces of advice for management teams as they think about how best to navigate the public markets?

  1. Keep the faith – Capitulating at this period of maximum pain feels like we are depriving the UK equity market of some of its best long term compounding stories in the small-cap arena.
  2. Be cautious in forecasting – The ‘meet-or-beat’ mantra is even more important now when the market is in risk-off mode. Companies are not being rewarded for ambitious forecasting in the current climate, so it is better to be out in front of this.
  3. Think long-term of what market can do for you - While current share prices are not fully reflective of the prospects of businesses, there are still significant medium to longer-term benefits to being a listed business, including transparency and availability of capital. It wasn’t that long ago when the small-cap market really came into its own during covid times, being quick to support businesses in their time of need, to fund growth ambitions, often in substantial volumes.

What is the most interesting thing you’ve read or watched recently?

  1. 'Richer, Wiser, Happier' by William Green – it is a compendium of his interactions with some of the world’s most successful investors and an exploration of their individual lessons, their mentality, how they remain resilient, and how they apply that to both investing and their own lives. It is fascinating.
  2. 'Unnatural Causes' by Dr. Richard Shepherd – it follows his work as a forensic pathologist and, in doing so, almost charts social histories in the UK, which was interesting and unexpected for me. This together with the depth and beauty of his prose made it a fascinating read.

Please note: The views and opinions expressed in this interview are those of the individual financial professional(s) and do not necessarily reflect the views or opinions of Alma Strategic. These insights are provided for informational purposes only and may not be relevant at the time of reading, as market conditions can change rapidly. The information provided should not be construed as investment advice or a recommendation to buy, sell, or hold any financial product or security. Individuals should conduct their own research and consult with a qualified financial advisor before making any investment decisions. Alma Strategic disclaims any responsibility for the accuracy or completeness of the information provided in this interview.