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

8th February 2022

January: Volatility to the fore; UK market outperformance

Markets began 2022 as they had ended – with a flourish. This however proved short lived as global equities, particularly technology and growth stocks, suffered sharp falls. Concerns over the withdrawal of monetary stimulus by central banks and the prospect of rising interest rates has resulted in investors now putting a lower value on the future revenues – which most affects growth companies.

We commented last month on the exuberance of the US market and believed the UK market should offer some downside protection – which has been duly borne out. The FTSE 100, in recent years, has lagged overseas markets and its own mid and small cap indices. Talk of a ‘Jurassic index’ where ‘old economy’ stocks make up a significant part of the index, are proving overdone. The prospect of higher interest rates and higher energy prices have sent financial and commodity shares, well represented in the UK, materially higher. Whilst suffering growth stocks will surely stage a snap back at some point, we believe the lowlier valued parts of the market have further gains to make.

This is why we favour a broad and well diversified portfolio across different sectors and market capitalisations. Some of our more highly valued constituents have suffered in this indiscriminate market sell off but having exposure to consumer discretionary, banks, oils and mining has helped offset falls elsewhere.

A relatively quiet month for primary market opportunities, as January often is, as investment bankers sharpen their pencils for the year ahead. We are aware of a number of equity raises and IPO’s that are expected to take place in the first half of this year.

Team 17 was added to the portfolio as part of an equity raise. The holding in Unilever, was also increased as we took advantage of market volatility to buy in the secondary market. We also purchased a FTSE 250 ETF in anticipation of the substantial underperformance of the mid cap index reversing.

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

In January the IFSL RC Brown UK Primary Opportunities fund returned -4.81% compared with -0.33% for the FTSE All Share and -3.65% for the IA UK All Companies sector. Mid and small caps materially underperformed the FTSE 100.


Team 17

Team 17 is a computer games developer with a strong track record since IPO in 2018. We acquired the shares as part of an £80m fund raise to fund the acquisition of a German video games developer.


Unilever is one of FTSE’s largest constituents and best known for brands such as Hellman’s mayonnaise and Wall’s ice cream. Its performance over recent years has been poor and the board is facing increasing shareholder pressure to set out a coherent strategy to improve performance. Having made a £50bn bid for GlaxoSmithKline’s consumer unit, shares were sold off on fears they were over paying and the expectation of an equity raise to fund the deal. GSK rejected the deal and Unilever vowed not to make a higher offer. At this point we added to our holding as we considered the share price fall overdone and with the shares offering a dividend yield of over 4%, the shares provide a useful source of income. It is now one of the largest holdings in the portfolio.


Profits were taken in Gresham Technologies and Brickability following strong trading updates. Underperformers HeiQ and Countryside Properties were sold. The holding in Watches of Switzerland was sold on exceptional 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 %) – January 2022

Fund/Benchmark Name 3M to 31/01/22 6M to 31/01/22 Year to 31/01/22 3 Years to 31/01/22 5 years to 31/01/22 Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc -3.6 -0.1 14.3 28.0 44.7 503.0

Quartile Ranking

IA UK All Companies

3 3 3 1 1 1
IA UK All Companies -1.9 -0.3 13.9 23.1 30.7 314.2
FTSE All Share 2.0 5.6 18.9 21.7 30.2 325.0

Source: FE: 31/01/22 Cont.
Discrete Annual Performance (Total Return %) – January 2022

Fund/Benchmark Name Year to 31/01/22 Year to 31/01/2021 Year to 31/01/2020 Year to 31/01/2019 Year to 31/01/2018
MFM UK Primary Opportunities P Acc 14.3 -0.8 13.0 -4.3 18.1
Quartile Ranking IA UK All Companies 3 1 2 2 1
IA UK All Companies 13.9 -4.5 13.2 -5.6 12.5
FTSE All Share 18.9 -7.6 10.7 -3.8 11.3

Source: FE: 31/01/22

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.