IFSL RC Brown UK Primary Opportunities Fund | Fund Update | December 2021

10th January 2022

December: A belated Xmas rally as worst case Omicron fears prove unfounded

The UK market ended 2021 with a flourish as the news flow over the latest Covid variant, Omicron, proved less bad than feared – more transmissible but less severe than Delta. Hence the greater restrictions introduced early in the month are unlikely to be tightened further, providing a fillip for economically sensitive stocks.

So, what to make of 2022 as we head into the new year? We leave crystal ball gazing and predictions to others, but we anticipate the pandemic induced recovery having further to run as the world increasingly opens up. No doubt this will be punctuated by periods of concern over new variants, but there are signs for optimism in the battle with Coronavirus.

2021 saw over £30bn raised in London as companies sought equity capital for expansion purposes. We expect 2022 to be another busy year for primary opportunities as companies continue to take advantage of economic growth. Nevertheless, we are mindful of the exceptional strength equities have enjoyed since the Coronavirus lockdown induced nadir of March 2020. Rising interest rates, inflation and monetary tightening dictate that some caution is required. Given UK equity underperformance in recent years, particularly compared with an exuberant US market, we feel justified in believing the UK has some downside protection, given its more modest valuation and dividend yield over 3% (double that of the S&P), as and when a setback occurs. Takeovers are likely to remain a feature for as long as this wide discount continues. Ultimately it is a stock pickers’ market, which suits active managers such as ourselves.

During the month, we participated in the equity raises in Urban Logistics, Agronomics, Chrysalis Investments, Likewise and Springfield Properties. We also participated in the IPO of Public Policy Holdings Corporation. Whilst one may expect transactions to tail off as the Christmas season approaches, it always surprises us the number of fund managers who ‘pack up’ for the year in early December and do not entertain the idea of making new investments until the new year. This results in those companies that are raising money in December typically finding it a bit harder and as a result, the discounts we are able to obtain are larger, which in the long-term aids performance. It is not unusual for our work Christmas lunch to be ‘disturbed’ by a corporate financier wanting to finalise pricing with us. That is absolutely fine by us, if the market is open, we are open for business.

In December the IFSL RC Brown UK Primary Opportunities fund returned 4.17% compared with 4.68% for the FTSE All Share and 4.47% for the IA UK All Companies sector.

For the year, IFSL RC Brown UK Primary Opportunities fund returned 20.52% compared with 18.32% for the FTSE All Share and 17.25 % for the IA UK All Companies sector, a top quartile performance. This is the fourth year in the last five years that the fund has produced a top quartile performance.


Urban Logistics REIT

Urban Logistics is a property company investing in industrial and logistics properties whose customers are increasingly meeting the challenges of e-commerce. Urban Logistics is differentiated from its larger competitors in that its sites are smaller and more localised. We acquired the shares as part of a £250m equity raise to fund the acquisition of further properties. The company has also announced its intention to move from the AIM to the full market and is expected to enter the FTSE 250 in the coming months. The shares have appreciated 10% since purchase.


Agronomics is an investment company focused on the early-stage industry of modern foods which are environmentally friendly alternatives to the traditional production of meat and plant-based foods. In a world needing to reduce carbon emissions, food production is an area ripe for disruption. Investee companies include Meatable, which is seeking to replicate meat production without the need for slaughtering animals, and BlueNalu, a leader in cell-cultured seafood. Given the early-stage nature of the investments, it is at the higher end risk threshold for the fund. Nevertheless, the opportunity is sizable and we chose to add to our holding as part of an equity raise to allow further investments in its portfolio companies. Notable shareholders include serial investor Jim Mellon and Richard Reed, founder of Innocent Smoothies.

Chrysalis Investments

Chrysalis is a British investment trust focused on investing in a portfolio of fast growing, disruptive, private UK and European private companies. Its portfolio of companies includes Starling Bank and Klarna. We acquired the shares as part of a £60m placing to further fund their portfolio companies.

Likewise Group

Likewise is a flooring company. It floated on the AIM market in August with the purpose of consolidating a fragmented industry. With a market capitalisation of £80m, it is a little smaller than the companies we typically look to buy, but the acquisition target was compelling and materially earnings enhancing. The placing was also done at a 20% discount to the share price and we anticipate further gains from here.

Springfield Properties

Springfield is a Scotland based housebuilder providing good quality mid-range apartments and houses. We acquired the shares as part of a £22m equity raise to fund the purchase of rival Tulloch Homes which expands the Group’s presence into Inverness, one of the UK’s fastest growing cities.

Public Policy Holdings Company

PPHC is a leading, bipartisan, full-service government affairs company based in the US. Representing over 500 clients and helping them enhance and defend their reputations, manage regulatory risk and engage with the US federal and state level policy makers. We acquired the shares at IPO where the funds raised will be used to acquire other companies to broaden their services and geographical footprint. In time, the company may look to enter new markets such as the UK. An AIM listed company, the shares are modestly valued and with a prospect dividend yield of 7%, we expect the shares to re-rate in time.


Underperformers Kitwave and PensionBee were sold, whilst profits were taken in Renalytix AI, Aferian and Legal & General. Auction Technology was trimmed on strength. We shall continue to sell those holdings where we either believe we have made the majority of profits we are likely to, or where the company is not meeting our expectations. This means we are continually reviewing our portfolio which allows us to fund new, more exciting and profitable primary opportunities that arise.

Cumulative Performance (Total Return %) – December 2021

Fund/Benchmark Name 3M to 31/12/21 6M to 31/12/21 Year to 31/12/21 3 Years to 31/12/21 5 years to 31/12/21 Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc 2.3 5.4 20.5 39.4 54.4 533.4
Quartile Ranking IA UK All Companies 3 2 1 2 1 1
IA UK All Companies 2.1 4.9 17.3 34.7 36.4 330.0
FTSE All Share 4.2 6.5 18.3 27.2 30.2 326.4

Source: FE: 31/12/21


Discrete Annual Performance (Total Return %) – December 2021

Fund/Benchmark Name Year to 31/12/21 Year to 31/12/2020 Year to 31/12/2019 Year to 31/12/2018 Year to 31/12/2017
MFM UK Primary Opportunities P Acc 20.5 -2.7 18.9 -7.2 19.4
Quartile Ranking IA UK All Companies 1 1 3 1 1
IA UK All Companies 17.3 -6.0 22.2 -11.2 14.0
FTSE All Share 18.3 -9.8 19.2 -9.5 13.1

Source: FE: 31/12/21

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.