IFSL RC Brown UK Primary Opportunities | Fund Update | February 2022

4th March 2022

February: A gremlin in The Kremlin

As investment managers we shall stick to our area of expertise in writing about the impact of Russia’s invasion of Ukraine on equity markets. Naturally we condemn Russia’s outrageous actions.

History suggests market falls as a result of military action prove relatively short lived. However, this time around, the action is rather closer to home and the aggressor is the eleventh largest economy in the world and a major supplier of oil and gas to Europe. Hence, it is reasonable to assume there will be greater equity market volatility and elevated energy prices whilst military action is in progress.

In terms of our own portfolio, our direct exposure to Russia is minimal. BP is the most affected, with a 20% stake in Russian state-oil company Rosneft. In recent days the company has announced its plans to divest the entire holding. Shell has also announced it will exit its joint ventures with Gazprom. There are a number of large Russian controlled companies on the London Stock Exchange (Evraz and Polymetal are both (for now) FTSE 100 constituents). Whilst we like to invest in companies that have international sales and exposure, we have never been fans of investing in companies with significant operations and exposure to questionable governments. In our experience, the risks tend to outweigh the rewards, and as we have seen in recent weeks, valuations can be crushed in very short order. A tracker fund would not have had the luxury of screening out such stocks.

As ever we favour a broad and well diversified portfolio across different sectors and market capitalisations. Some of our more highly valued constituents have suffered this year from a rotation out of growth stocks into more value biased companies. Others have suffered from Covid related delays and rising inputs prices. Our exposure to consumer discretionary, oils and mining has helped offset falls elsewhere.

A relatively quiet month for primary market opportunities – we are aware of a couple of IPOs that have been postponed due to volatile market conditions. Nevertheless, we are still seeing companies looking to raise money and are aware of a number of equity raises and IPOs that are expected to take place when there is more political and economic clarity.

LXI REIT was added to the portfolio, whilst we used market volatility to modestly add to our holdings in FTSE 100 companies Melrose, Experian, Vodafone and Barclays. When there are sharp mark downs in what we consider to be good quality, dividend paying companies, we will use these opportunities to deploy some of our spare cash. Whilst not buying shares at a discount as part of our primary opportunities process, we are buying shares at what we consider to be a discount to recent weeks and in the fullness of time, as the political and economic picture becomes clearer, we anticipate a recovery in these sold off assets.

Rising interest rates, inflation and monetary tightening dictate that, regardless of the Ukraine situation, some continued caution is required. Nevertheless, the UK market’s attractive valuation and dividend yield of 3% (double that of the S&P), provides ground for optimism.

In February the IFSL RC Brown UK Primary Opportunities fund returned -3.0% compared with -0.5% for the FTSE All Share and -2.9% for the IA UK All Companies sector. Mid and small caps again materially underperformed the FTSE 100.



LXI is a property investment trust, investing in a diversified portfolio of long-term index-linked leases with blue chip clients who include Premier Inn, Waitrose, Aldi, Lidl and Starbucks. We acquired the shares as part of a £250m equity raise to acquire further properties. In a market that may prove volatile for some time, LXI, with a dividend yield in excess of 4%, offers a steady and reliable income stream.


Profits were taken in wealth manager Mattioli Woods. 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 %) – February 2022

Fund/Benchmark Name 3M to 28/02/22 6M to 28/02/22 Year to 28/02/22 3 Years to 28/02/22 5 years to 28/02/22 Since Inception (28/05/1997)
IFSL RC Brown UK Primary Opportunities P Acc -3.8 -5.5 5.4 22.8 37.0 485.1
Quartile Ranking IA UK All Companies 3 3 3 1 1 1
IA UK All Companies -2.2 -6.1 7.6 17.8 23.9 302.4
FTSE All Share 3.8 24 16.0 18.4 25.7 323.0

Source: FE: 28/02/22


Discrete Annual Performance (Total Return %) – February 2022

Fund/Benchmark Name Year to 28/02/22 Year to 28/02/2021 Year to 29/02/2020 Year to 28/02/2019 Year to 28/02/2018
IFSL RC Brown UK Primary Opportunities P Acc 5.4 14.3 1.9 0.1 11.6
Quartile Ranking IA UK All Companies 3 1 2 2 1
IA UK All Companies 7.6 8.5 1.0 -1.3 6.6
FTSE All Share 16.0 3.5 -1.4 1.7 4.4

Source: FE: 28/02/22

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.