August update – markets see sharp falls on further trade war concerns and Brexit concerns intensify – albeit M&A in the UK mid caps as overseas buyers stepped in

6th September 2019

We participated in two primary opportunities – Equals Group raised money and Brickability made its market debut at IPO.

In August, the MFM UK Primary Opportunities Fund returned -4.36% compared with -3.57% for the FTSE All Share and -3.30% for the IA UK All Companies Sector. Our underweight position in the Mid Cap 250 Index was not helpful as it had a strong month relatively, outperforming the FTSE 100 markedly. Whilst the Fund did benefit from its modest holding in Entertainment One which saw a takeover approach, mid cap Burford Capital performed poorly and our UK large cap domestic names such as Lloyds Bank, RBS and Legal & General weighed on the portfolio as sentiment towards UK domestics soured further as no deal fears rose.

It was very much a risk off month as President Trump announced that additional tariffs would be imposed on imported Chinese goods – albeit there are hopes that further trade talks will produce a more positive outcome. Fears over a US recession were stoked as the US yield curve inverted (whereby ten year government bonds yield less than two year government bonds) which is seen by the market as a very bearish indicator as investors seek safety.

In the UK, sterling weakened further as UK Q2 GDP contracted 0.2% and Prime Minister Johnson announced a suspension of parliament for an extended period of time in the run up to the UK’s expected departure date of 31 October. The political situation is extremely fluid with opposition attempts to block a no deal Brexit. Whilst the uncertainty is clearly unhelpful to sentiment, M&A activity has increased as overseas buyers have used sterling weakness to bid for UK listed mid caps. This month saw Greene King and Entertainment One receive approaches and given the valuation discount of the UK market relative to other developed markets, further bids are likely.

Please be advised that the past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested



Equals Group

Equals is a challenger in the financial services sector offering retail and business customers international payment solutions, corporate expenses, current accounts, credit facilities, currency cards and travel cash. We acquired the shares as part of a placing where the money will be used to grow their corporate business and consolidate the market through bolt on acquisitions.


Brickability is the market leading supplier of bricks in the UK to housebuilders and the construction industry, selling over 300 million bricks a year. It also supplies masonry services, roofing tiles and slates. We acquired the shares at IPO where £57m was raised. We view the shares as attractively valued on a modest rating and a prospective dividend yield of 4.5%. Whilst there is political uncertainty in the UK, one area all major political parties can agree on is the need for more houses to be built which is beneficial for Brickability.



Burford Capital

Shares in the funding litigation company fell sharply following the publication of an aggressive sell note by hedge fund short seller Muddy Waters. The Company sharply rebuffed the allegations which saw the shares recover some of the lost ground and we decided to cut our losses. In the shorter term, we fear the shares will continue to be subdued and believe the growth rating that the Company previously had will take some time to rebuild.


We sold our remaining holding in this cyber security software company following a positive trading statement and were happy to take profits.


We trimmed the holding in this UK property company, as in a sharply weaker market, its shares held up well, creating some cash which we may use if the market suffers further falls.


Cumulative Performance (Total Return %)– August 2019

Fund/Benchmark Name Year to 31/08/2019 3 Years to 31/08/2019
5 years to 31/08/2019
Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc -3.45 27.66 43.66 390.83
Quartile Ranking – IA UK All Cos 3 1 1 1
IA UK All Companies -3.18 17.35 29.65 254.83
FTSE All Share 0.44 20.20 31.17 272.66


Discrete Annual Performance (Total Return %)– August 2019

Fund/Benchmark Name Year to 31/08/2019 Year to 31/08/2018 Year to 31/08/2017 Year to 31/08/2016 Year to 31/08/2015
MFM UK Primary Opportunities P Acc -3.45 7.05 23.51 13.98 -1.27
Quartile Ranking – IA UK All Cos 3 2 1 1 3
IA UK All Companies -3.18 6.54 13.77 8.85 1.52
FTSE All Share 0.44 4.68 14.33 11.73 -2.34

Source: FE 2019


The past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested. R.C. Brown and Marlborough are authorised and regulated by the FCA. Marlborough Fund Manager are the ACD. The Key Investor Information Document and the Full Prospectus can be obtained via or by request at: