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

7th April 2022

March: UK inflation hits 30 year high; markets regain some poise

March has seen further market volatility as the ongoing Russian invasion of Ukraine continues and energy prices remain substantially higher than before the war began. Whilst we hope for peace, stock markets will continue to fluctuate on news flow as hopes rise and recede in equal measure.

When a major event, such as a war, a natural disaster or a major political event (such as the Brexit vote or an unexpected election result) occurs, it is normal for equity fund raisings to pause for a short while whilst companies and the economy consider the impact of what may be a profound change. Hence, with the uncertainties of a war in Europe, equity raisings may be put on hold for a short period. In our experience, this pause only lasts for a matter of weeks, as once planning and scenarios are mapped out, and investors have recovered their nerve, companies will want to continue with their expansion plans, and despite market turbulence, good quality companies are able to deal with uncertainties that arise. We have therefore again started to see some companies successfully raise money, albeit this month we have not participated in any new opportunities.

A relatively quiet month for primary market opportunities – we were close to an investment in The Renewables Infrastructure Group but in a slightly unusual reverse auction style equity raise, the price we were prepared to pay was not filled. There was also a secondary sell down in existing holding, London Stock Exchange. The shares had enjoyed a strong month, rising over 10%. Whilst we are content holders, we decided not to add to our holding given recent strength and an insufficient discount being applied to the placing. After a quiet start to the year for equity raisings, we expect the pace to pick up going forward. As ever, we only invest in a minority of the placings on offer, keeping pricing discipline and the structure of the portfolio intact.

We used the extreme market volatility to add modestly to our holdings in blue chip FTSE constituents BP, HSBC and Prudential. All offer attractive dividend income and are trading above the levels of our most recent purchases. 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. This month saw a substantial level of M&A activity in the small and mid-cap space, with McKay Securities, Stagecoach, Ted Baker and Brewin Dolphin, all being the subject of bid offers – highlighting the value available in the UK market.

In March the IFSL RC Brown UK Primary Opportunities fund returned 0.9% compared with 1.3% for the FTSE All Share and 1.6% for the IA UK All Companies sector. Essensys, a software provider for the growing flexible office space had an extremely disappointing trading update with the shares falling sharply – providing a drag on performance in the month.


No new companies were added to the portfolio in the month.


Essensys was sold following its disappointing trading update. We also trimmed the holding in Kape Technologies, an internet security company on strength and a positive trading update. Urban Logistics, a property investment company, was trimmed following its promotion to the FTSE 250 and recent strength.

Cumulative Performance (Total Return %) – March 2022

Fund/Benchmark Name 3M to 31/03/22 6M to 31/03/22 Year to 31/03/22 3 Years to 31/03/22 5 years to 31/03/22 Since Inception (28/05/1997)
IFSL RC Brown UK Primary Opportunities P Acc -6.8 -4.6 3.7 21.2 35.1 490.4
Quartile Ranking IA UK All Companies 3 3 3 1 1 1
IA UK All Companies -4.9 -2.8 5.4 17.5 24.1 309.0
FTSE All Share 0.5 4.7 13.0 16.8 25.8 328.5

Source: FE: 31/03/22


Discrete Annual Performance (Total Return %) – March 2022

Fund/Benchmark Name Year to 31/03/22 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 3.7 42.1 -17.8 5.6 5.6
Quartile Ranking IA UK All Companies 3 2 2 2 1
IA UK All Companies 5.4 38.0 -19.2 2.9 2.7
FTSE All Share 13.0 26.7 -18.5 6.4 1.3

Source: FE: 31/03/22

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.