November update – a busy month as we participated in eight primary opportunities with attractive discounts on offer
We participated in eight primary opportunities – Bovis Homes and Brooks Macdonald raised fresh capital whilst there were secondary sell downs in Breedon, SCS, Trainline, Network International, Team17 and Future. With markets showing some signs of nervousness over global trade wars and a UK general election, we are seeing larger discounts than usual being offered on placings, which should prove helpful for the longer term performance of the Fund as we are buying at even more attractive levels.
In November, the MFM UK Primary Opportunities Fund returned 3.22% compared with 2.24% for the FTSE All Share and 3.52% for the IA UK All Companies Sector.
It proved a strong month for global equities with the US hitting record highs on hopes that a trade deal will be struck between the US and China. In the UK, the general election campaign got into full swing. The polls suggest a modest Conservative majority – widely seen as the most market friendly outcome as it is expected to bring clarity around the UK’s future relationship with the EU and a perceived friendlier business environment than under a socialist Corbyn government.
Mid caps again outperformed the FTSE 100 as investors continued to see value in UK domestics. Small caps, having lagged in 2019, started to play catch up, outperforming the FTSE 100 – we anticipate 2020 being a strong year for small caps as investors look to increase exposure to this modestly valued part of the market.
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
Breedon is a construction materials business and one of the alternative investment market’s (AIM) largest constituents with a market capitilisation in excess of £1bn. We acquired the shares at a 10% discount to the prevailing market price as part of placing by the Company’s largest shareholder. Our holding is already showing a useful double digit percentage gain.
SCS is one of the UK’s largest sofa and carpet retailers. We acquired the shares as part of a placing by private equity at a 6% discount to the prevailing market price and including a 5% dividend which has now been paid. Whilst we acknowledge the tough UK consumer market, we see deep value in this lowly rated stock which has over £40m in cash as part of its £90m market capitilisation.
The shares were purchased as part of £150m placing to help the acquisition of Linden Homes, making the combined group the fifth largest housebuilder in the country. We see the housebuilding market as well underpinned in the UK given the commitment of all major political parties to increase the number of homes built.
The Trainline Group
The Trainline is the market leading website and app for booking train tickets in the UK. It also provides its software for other train operators and has recently commenced operations in Europe, a substantially larger market than the UK. We took the opportunity of a final sell down by private equity to add to our holding in this growth company with a leading market position.
Network International is a fast growing payment processing services company in the Middle East and Africa. It services vendors by facilitating them to accept payment from customers and also provides debit, credit and prepaid cards to customers. We added to our holding in the Company as part of a secondary sell down by private equity.
Team17 is a computer games developer, operating in a fast growing market. The shares have performed strongly since IPO in 2018. We took advantage of a selldown by private equity at a 9% discount to initate a holding.
Brooks Macdonald is an investment management and financial advice company. The shares were purchased as part of a £30m fundraise used to acquire Edinburgh based Cornelian Asset Management. We anticipate the deal to be earnings enhancing from year one.
Future is a special interests media company and member of the FTSE 250, producing magazines and websites across a broad range of sectors including music, sport, crafts and computing. We acquired the shares at a 10% discount to the prevailing market price as part of a selldown by management.
We sold the remaining holding on further strength in the UK’s largest independent retailer of nearly new cars, realising a 25% profit in two months following the purchase from a forced seller.
Having reduced our holding in June following the suspension of the Woodford Equity Income Fund and with our concerns not yet allayed over the impact this may have on the Company, we used market strength to exit our holding, preferring to wait on the sidelines for the time being.
St James’s Place/Phonix Group/Aviva/Standard Life Aberdeen
Having reduced our holdings in the previous month, we took advantage of a further rally in UK domestic companies in the month and cogniscant of our overweight position in financials, we used the rally to trim our holdings in three of the names, whilst selling out of Standard Life Aberdeen entirely.
RBG Group (formerly Rosenblatt)
We exited our holding in this law firm, to help fund more attractive primary opportunities. We continue to have exposure to the sector via our holdings in Knights and Gateley.
We exited our holding in this financial services company which has performed disappointingly, preferring to recycle into new primary investment opportunities.
Cumulative Performance (Total Return %)– November 2019
|Fund/Benchmark Name||Year to 30/11/2019||3 Years to 30/11/2019
||5 years to 30/11/2019
||Since Inception (28/05/1997)|
|MFM UK Primary Opportunities P Acc||9.38||32.36||54.62||417.66|
|Quartile Ranking – IA UK All Cos||4||1||1||1|
|IA UK All Companies||12.35||23.86||38.10||276.07|
|FTSE All Share||11.01||24.00||36.99||286.77|
Discrete Annual Performance (Total Return %)– November 2019
|Fund/Benchmark Name||Year to 30/11/2019||Year to 30/11/2018||Year to 30/11/2017||Year to 30/11/2016||Year to 30/11/2015|
|MFM UK Primary Opportunities P Acc||9.38||-0.36||21.45||8.91||7.26|
|Quartile Ranking – IA UK All Cos||4||1||1||2||2|
|IA UK All Companies||12.35||-4.24||15.13||6.32||4.87|
|FTSE All Share||11.01||-1.46||13.35||9.77||0.64|
Source: FE 2019
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 FCA. Marlborough Fund Manager are the ACD. The Key Investor Information Document and the Full Prospectus can be obtained via www.marlboroughfunds.com or by request at: firstname.lastname@example.org