MFM UK Primary Opportunities | Fund Update | January 2021

3rd February 2021

2021: The year of the equity raise

We may still be in the early weeks of the new year but never have we been aware at this stage of the year of more equity raises, whether it be IPO’s or existing listed companies looking to raise funds. This is due to the combination of companies wanting to expand into the anticipated economic recovery and a backlog of deals that had been delayed as a result of uncertainty caused by the pandemic and Brexit. With markets believing in a vaccine assured future, along with a Brexit agreement and supportive cental banks providing ample cheap stimulus, much uncertainty that existed in 2020 has been removed as companies and investors focus on the future.

During the month, we added to existing holdings in IP Group and JD Wetherspoon. We also added Surface Transforms and Dr Martens to the portfolio. We are currently looking at a number of IPO opportunities.

The UK market ended the month lower, losing all of its gains made in the first two weeks of the year, as a cautious economic outlook by the Federal Reserve and further severe, lengthy lockdowns across Europe, focused investors mind. Whilst a recovery later in the year is still widely expected, it is likely to take longer than many anticipated last year, amid a stock market that has already had a remarkable recovery. A pause for now feels healthy as parts of the global equity market are trading at record levels and valuations.

Markets do not go up in straight lines. We feel given the sharpness of the recent rally, equity gains may be more muted in 2021 than many believe. What is clear to us is the valuation gap between the UK and other developed markets. We expect this to narrow over coming years and the UK market, given its international nature, is well geared to a global economic rebound. The trade deal with the EU should also provide some clarity and encourage overseas investors who have been eschewing the UK to re-enter. As active primary opportunity investors, typically investing at the time a company is raising money, we are well positioned to invest in companies seeking to expand in 2021 and beyond. Conditions provide fertile ground for active investors – those who merely participate in buying passive funds we believe are set to miss out further.

We remain excited for the prospects of our current portfolio as well as the primary opportunities that we are currently considering for future investment.

In January the MFM UK Primary Opportunities fund returned 0.4% compared with -0.8% for the FTSE All Share and -0.8% for the IA UK All Companies sector. Performance has been particularly strong of late as a number of holdings acquired in 2020 have started to run. Our primary opportunities process enables us to buy in at the stage a company is raising money. On occasions, a stock performs strongly as soon as it has announced the fund raise as it is well received by the market, but more typically it takes a period of time for the funds to be deployed and the market to appreciate the anticipated greater sales and profitability. Last year’s investments are starting to bear fruit with more we believe to come. Today’s investments will further tomorrow’s returns.

***Stock in focus***

Renalytix AI

Renalytix uses artificial intelligence for the early detection of kidney disease, one of the most common and costly chronic medical conditions globally. We first acquired the shares in 2019 and they have sinced more than trebled, aided by a management that has consistently delivered on key milestones. An AIM listed company in the UK, it achieved a secondary listing on Nasdaq in 2020, opening its investor base further. The shares have enjoyed a strong to start to 2021 on the announcement of a collaboration with Davita, a US kidney care specialist whose largest shareholder is Warren Buffet’s Berkshire Hathaway. It remains one of the most exciting shares in the portfolio.


IP Group

IP is an investment company comprising of holdings in early stage companies, providing seed capital and resources in return for equity in companies spun off as a result of research. It has partnerships with UK universities including Oxford, Cambridge and King’s College London. Having bought the existing holding in 2019 as a result of the liquidation of the Woodford Equity Income Fund, we added to the holding as part of a selldown by Invesco, (at a 10% discount to the previous night’s closing price) linked to the departure of

Neil Woodford’s protégé, Mark Barnett.

JD Wetherspoon

A leading pub operator with over 870 sites across the UK. The lockdown has gone on for longer than management anticipated when they raised £140m in April 2020. This month we added to our holding as part of a £94m raise to bolster the balance sheet in case the current lockdown goes beyond this April and in order provide funds if expansion opportunities arise. A market leader that we anticipate seeing a strong recovery and gaining market share as the pandemic is brought under control and restrictions are loosened.

Surface Transforms

ST is a designer and manufacturer of carbon ceramic disc brakes used in high value cars. Whilst significantly more expensive than the widely used iron disc brakes, unlike iron discs, they last for the lifetime of the vehicle, resulting in less waste. They are also significantly lighter and with the growth of electric vehicles which due to their batteries are heavier, car manufacturers are increasingly looking at ways to reduce vehicle weight. We acquired the shares as part of a fund raise to expand production as a result of winning a multi million contract with Tesla, who will use their brakes in upcoming models.

Dr. Martens

Dr. Martens or ‘Docs’ as many of their loyal customers call them is an iconic footwear brand, best known for its chunky boots with air compression soles. The company is growing strongly and sees the opportunity to expand its presence in markets such as Germany, North America and China. Increasingly they are able to sell their products direct to consumers through their retail stores and online, driving profitability. We acquired the shares as part of the IPO process.


We continued to raise cash for the new primary opportunities that we wish to participate in and believe will add value to the portfolio. We exited the remaining modest holding in life insurer Phoenix Group on market strength early in the month. IMImobile was sold following its takeover approach from US giant Cisco systems, achieving a return of over 90% since purchase last April. Law firm Knights Group was sold following results and a rating that is up with events in our view. The holding in hydrogen fuel technology company ITM Power was reduced on further strength following an announcement that it and German gas giant Linde plan to build a green hydrogen plant. The shares, already very highly rated, are due a pause at the very least.

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.

Cumulative Performance (Total Return %) – January 2021

Fund/Benchmark Name 3M to 31/01/2021 6M to 31/01/2021 Year to 31/01/2021 3 Years to 31/01/2021 5 years to 31/01/2021 Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc 22.6 17.6 -0.8 7.2 51.7 427.7

Quartile Ranking

IA UK All Companies

1 2 1 2 1 1
IA UK All Companies 18.2 15.8 -4.5 2 34.9 263.6
FTSE All Share 16.1 12.5 -7.6 -1.6 31.5 257.5

Source: FE: 31/01/2021


Discrete Annual Performance (Total Return %) – January 2021

Fund/Benchmark Name Year to 31/01/2021 Year to 31/01/2020 Year to 31/01/2019 Year to 31/01/2018 Year to 31/01/2017
MFM UK Primary Opportunities P Acc -0.8 13.0 -4.3 18.1 19.8

Quartile Ranking

IA UK All Companies

1 2 2 1 2
IA UK All Companies -4.5 13.2 -5.6 12.5 17.6
FTSE All Share -7.6 10.7 -3.8 11.3 20.1

Source: FE: 31/01/2021

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 Financial Conduct Authority. Marlborough Fund Manager are the ACD. The Key Investor Information Document and the Full Prospectus can be obtained via or by request at: