Primary Opportunities and Purchases
Primary Opportunities
In June , IFSL RC Brown UK Primary Opportunities (-1.6%) outperformed the UK equity market (-2.5%), a 5th month out of 6 months this year of outperformance by the fund.
We participated in placings in BT, Hurricane Energy and DS Smith. In order to help fund these opportunities we top sliced our holdings in Caretech and On the Beach which have both performed well.
Markets came off record highs reached in the previous month. The UK election produced an unexpected hung parliament though the market largely took the result in its stride. An informal coalition now appears to exist though not having a government with a strong mandate may bring uncertainty in the future which may affect economic growth. Oil prices were again weak and hit 7 month lows on persistent fears that production cuts by major producers will not be enough to reduce a global oil glut.
Markets are trading at historically high valuations which are justifiable given the earnings momentum and attractive dividend yield on offer, particularly from the UK market. However we are cognisant of the strong run in markets since last year and the stretched valuations in some parts of the markets. We are currently seeing a plethora of primary opportunities as companies look to raise money post the election and before the inevitable summer lull.
Purchases
BT
The shares were acquired at a discount from global mobile operator Orange. Following a difficult year for the company, we view this as an attractive opportunity to buy into the UK market leading phone and broadband company paying a good dividend.
Hurricane Energy
Hurricane is developing oil fields in the North Sea, the largest in the area for many years, believed to be over 500m barrels of recoverable oil. Over £500m was raised in debt and equity and provided us with an opportune time to a company we had been following for some time with the expectation they would need to raise money.
DS Smith
DS Smith is a paper and corrugated packaging business. It raised £285m to help fund the purchase of Interstate Resources which will aid DS Smith’s US expansion. We believed the deal made operational sense and would be well received by the market and hence bought in at the placing.
Sales
On the Beach
We trimmed our holding in OTB following a strong run as the market continues to re-rate the Company in line with its growth profile and cash generative model. It remains one of our larger active positions.
Caretech
This care home operator has performed strongly since raising money to fund expansion earlier this year. Following a solid set of results and good share price performance we took the opportunity to reduce our holding.
Discrete Annual Performance – June 2017
| Fund/Benchmark Name | 30/06/2012 to 30/06/2013 | 30/06/2013 to 30/06/2014 | 30/06/2014 to 30/06/2015 | 30/06/2015 to 30/06/2016 | 30/06/2016 to 30/06/2017 |
|---|---|---|---|---|---|
| IFSL RC Brown UK Primary Opportunities P Acc | 14.99 | 12.35 | 4.67 | -0.52 | 33.21 |
| IA UK All Companies | 22.26 | 13.99 | 7.03 | -4.10 | 22.53 |
| FTSE All Share | 17.93 | 13.12 | 2.60 | -2.21 | 18.12 |
Source: FE 2017
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.
