October update. Markets’ sharpest falls since March. New primary opportunities keep on coming

11th November 2020

Global markets fell sharply, hitting six month lows as the coronavirus pandemic continued to spread more quickly than feared in Europe this autumn as hospitalisations and deaths rates climbed. The UK unemployment rate rose to a three year high and a deal with the EU remains in the balance, but with both sides continuing talks, hopes of a deal remain. Sterling remained relatively stable.

The significant discount of the UK market relative to other major markets was again highlighted as McCarthy & Stone and TalkTalk received bid offers (following on from bids for G4S and William Hill in September). We expect to see more of this if the differential remains this wide.

Once again we were active in the primary markets. Despite the market uncertainty and difficult economic background, we have seen a good supply of companies emboldened to raise money in order to accelerate their growth.

We added ITM Power and Kape Technologies to the portfolio and also participated in the successful IPO’s of Fonix Mobile and Source Bio International. A number of holdings were exited in order to raise cash for these opportunities.

In October, the MFM UK Primary Opportunities fund returned -2.37% compared with -3.82% for the FTSE All Share and -3.25% for the IA UK All Companies sector.

The US presidential election on November 3 was very close run, confounding polls which had broadly predicted a strong Biden victory. As we write, a Biden victory appears likely, but President Trump may contest the results and not go quietly.

***Stock in focus***

Open Oprhan

Open Orphan is a leader in the testing of vaccines and antivirals using human challenge trials. It is currently extremely busy as global pharmaceutical companies work to provide a vaccine against Covid-19. Open Oprhan provides the facilities where humans are tested with these vaccines, thus ensuring any vaccine has been fully tested and is safe for commercial roll out. This month it announced a contract with the UK government that will be worth at least £10m and we anticipate further contracts in the future. The shares have more than doubled since we participated in May’s placing and we took the opportunity to take some profits following the contract news. It remains one of the most exciting companies in our portfolio.



Fonix Mobile

Fonix is a UK mobile payments business allowing companies to easily accept payments from consumers by adding charges to their mobile phone bill. Its clients include charities such as Red Nose Day and Stand up to Cancer and corporations ITV and Channel 5. We acquired the shares at IPO and consider the shares modestly valued giving the growth rate and provide a prospective dividend yield in excess of 5%.

ITM Power

ITM is a clean energy storage and clean fuel company, manufacturing products through its technology that produces hydrogen using only renewable electricity and water. We acquired the shares as part of a £165m placing alongside a strategic investment by Snam, an Italian energy infrastructure company. The money will be used to increase its manufacturing capabilities.

Source Bio International

Source Bio is a provider of laboratory services to blue chip pharmaceutical companies, the NHS and private hospitals in the UK. The company also has an infectious diseases unit and is producing over 8000 antigen tests a day to determine if someone has Covid-19. We acquired the shares at IPO where the funds raised will be used to increase antigen testing which should materially increase the size and profitability of the company.


A fire safety and water testing company we first acquired in 2016 and has been a regular raiser of cash as it has grown both organically and by acquisition. The company has continued to broaden its offering and we added to our holding as part of a £30m fund raise to acquire a business that provides employment law, HR compliance and health & safety advice to SME’s.

Kape Technologies

Kape is an internet privacy and security business providing services such as virtual private networks (VPN) to ensure people have privacy when online. We acquired the shares as part of a $100m fund raising following a recent acquisition. The company is fast growing, profitable and in an exciting space.




We took the opportunity of market strength early in the month to sell the remaining modest holding in this housebuilder. We continue to hold larger peers Taylor Wimpey and Countryside.


We sold this brick supplier, which has been a disappointing performer, in order to raise funds for new primary opportunities.


We took profits in this biotechnology company that is involved in the development of rapid COVID-19 tests. We used the funds to invest in Source Bio International and other potential primary opportunities in what is a busy area as companies look to raise money in order to accelerate testing.

St James’s Place

We sold our holding in this life insurance and wealth manager following a period of underperformance and concerns over the cost base. We prefer the lower cost platforms such as Hargreaves Lansdown, Integrafin and AJ Bell, which we hold. We await the management response and actions to shareholder concerns over the cost base and under performance.


We used the rare outperformance of UK banks on positive market trading updates to sell our modest holding in what has been a long-term underperformer. We continue to hold Lloyds which remains lowly valued and unloved. We view a Brexit deal and the re-instatement of dividends as potential catalysts.


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 %) – October 2020

Fund/Benchmark Name 3M to
6M to
Year to 31/10/2020 3 Years to 31/10/2020 5 years to 31/10/2020 Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc -4.1 -1.9 -14.2 -10.5 22.5 330.5

Quartile Ranking

IA UK All Companies

3 2 2 2 1 1
IA UK All Companies -2.0 -0.8 -15.3 -12.8 8.7 207.7
FTSE All Share -3.2 -2.0 -18.6 -14.4 8.9 207.8

Source: FE 31/10/2020

Discrete Annual Performance (Total Return %) – October 2020

Fund/Benchmark Name Year to 31/10/2020 Year to 31/10/2019 Year to 31/10/2018 Year to 31/10/2017 Year to 31/10/2016
MFM UK Primary Opportunities P Acc -14.2 4.2 0.0 22.6 11.7

Quartile Ranking

IA UK All Companies

2 4 1 1 2


IA UK All Companies


-15.3 6.8 -3.7 15.6 7.9
FTSE All Share -18.6 6.8 -1.5 13.4 12.2

Source: FE 31/10/2020

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 www.marlboroughfunds.com or by request at: info@rcbpo.co.uk