MFM UK Primary Opportunities | Fund Update | May 2021

4th June 2021

MFM UK Primary Opportunities | Fund Update | May 2021

May: UK equities make further progress amidst an M&A boom

The pace of equity raises remains unrelenting and we anticipate a busy summer ahead. There is a substantial pipeline of deals and our primary opportunities process is well placed to take advantage of the demand for equity raises as companies seek to expand into the economic rebound. Amino Technologies, Diversified Energy and Agronomics all raised fresh equity and were added to the portfolio. We also acquired Kitwave at IPO along with Watkin Jones which saw a secondary sell down.

The vaccination roll out continues apace in the UK, allowing for further easing of restrictions. The Bank of England upgraded the UK growth forecast to 7.25% in 2021, sending sterling higher. A second Scottish independence referendum is also not viewed as imminent following the SNP’s failure to win a majority of seats. The chance of further constitutional upheaval has reduced, at least for now. A sharp mid-month sell off owing to inflationary fears proved short lived as a plethora of bids from private equity buoyed markets. Mid-caps Sanne, Vectura and John Laing were bid for, along with former mid-caps, Equiniti, Senior and Spire Healthcare. This clearly highlights the value in UK equities that continue to trade at a discount relative to other developed markets and is why private equity funded deals are at their highest since 2012. The longer the discount remains, the more private equity and trade buyers will look to take advantage. Either way, we see this as a positive for UK equities.

In May the MFM UK Primary Opportunities fund rose for the seventh month in a row returning 0.83% compared with 1.11% for the FTSE All Share and 1.55% for the IA UK All Companies sector.

***Stocks in focus***

Rio Tinto/BHP/Anglo American

The mining sector has been on quite a tear year to date, comfortably outperforming the broader UK market and providing proof that so called ‘value’ or ‘old economy’ stocks have plenty of life in them. With the global recovery underpinning rising commodity prices, mining stocks are becoming a useful source of dividend income – overlooked by many investors. With a more disciplined outlook in terms of expansion, the sector has far lower indebtedness than the previous cycle which ended with the great financial crisis of 2008-09. The industry also has an important role to play in mining the materials used in the worlds energy transition to renewables. The fund holds Rio Tinto, BHP and Anglo American, representing 5.3% of the fund and a dividend yield over 4%.


Amino Technologies

Amino is a software led media company that allows pay tv operators and content owners to have their content more easily shared with viewers who look to access content in a growing multitude of ways, from set top boxes to mobile phones. We acquired the shares as part of a placing to fund a pipeline of acquisitions the company is intending to complete.

Diversified Energy

Diversified is predominantly a gas producer in America’s mid-west. It aims to buy mature assets with a low decline production profile. We acquired the shares as part of a $225m raise, at an 8% discount to the closing price, to fund the acquisition of materially earnings enhancing assets. A constituent of the FTSE 250, following its move from the junior AIM market last year, the shares offer an attractive dividend yield in excess of 8%.


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 participate in a £62m fundraise at a 40% discount to where the shares were previously trading. Notable shareholders include serial investor Jim Mellon and Richard Reed, founder of Innocent Smoothies.


Kitwave is a wholesale business specialising in selling confectionary, groceries, drinks and snacks to convenience stores, vending machine operators and restaurants. We acquired the shares at IPO where the company aims to use the proceeds to consolidate a fragmented market. With a PE of 11x and a prospective dividend yield of 5%, we believe the shares offer material upside.

Watkin Jones

Watkin Jones is the UK’s leading developer and manager of student accommodation. We acquired the shares as part of a placing by the founding family at an 11% discount to where the shares were trading prior to the announcement.


In what was another busy month for purchases, we raised money by selling some long term holdings such as BAE Systems and IG Design whose share price performance has not met our expectations of late. Underperformers Aveva and Ecofin Renewables Investment Trust were also sold. Profits were taken in ITM Power and Johnson Service Group.  As ever, we are selling or reducing holdings in those companies where we believe we have seen much of the share price upside already and investing in new primary opportunities that we believe will give us a greater return – whilst keeping a well-diversified portfolio across sectors and market capitalisations. This simple, yet effective process, is what produces the consistent outperformance that the fund delivers.

Cumulative Performance (Total Return %) – May 2021

Fund/Benchmark Name

3M to 31/05/2021

6M to 31/05/2021

Year to 31/05/2021

3 Years to 31/05/2021

5 years to 31/05/2021

Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc 9.0 22.1 32.3 21.0 64.6 505.2

Quartile Ranking

IA UK All Companies

3 1 2 1 1 1
IA UK All Companies 9.8 17.0 28.6 11.2 44.1 310.7
FTSE All Share 9.6 15.2 23.1 5.9 40.5 299.7

Source: FE: 31/05/2021


Discrete Annual Performance (Total Return %) – May 2021

Fund/Benchmark Name Year to 31/05/2021 Year to 31/05/2020 Year to 31/05/2019 Year to 31/05/2018 Year to 31/05/2017
MFM UK Primary Opportunities P Acc 32.3 -6.8 -1.8 6.3 28.0

Quartile Ranking

IA UK All Companies

2 2 2 3 1
IA UK All Companies 28.6 -9.3 -4.7 6.6 21.6
FTSE All Share 23.1 -11.2 -3.2 6.5 24.5

Source: FE: 31/05/2021

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.