IFSL RC Brown UK Primary Opportunities | Fund Update | January 2023
A strong start to 2023 for equities
Last month we wrote that a Christmas rally had been more of a whimper but this month saw strong gains for global equities with the FTSE 100 hitting four-year highs. The FTSE 250 and small caps also enjoyed a strong month but remain well below recent year highs following last year’s material underperformance.
Optimism over falling inflation (though still high in the UK at 10.5%) and that interest rates may be peaking fuelled the market along with a broadly positive corporate earnings season. Whilst the number of profit warnings continue to demonstrate the difficult economic environment, expectations are modest and where companies meet or beat expectations, this is being rewarded with share price gains – a bullish sign in our view. Whilst there remains a pessimistic view on the UK economy by the likes of the International Monetary Fund (which forecasts the UK to be the only major economy to contract in 2023), valuations remain modest which will underpin performance in our opinion.
Equity fund raisings in the UK were at low levels in 2022 – £9bn, compared with over £30bn in 2020 and 2021. Whilst it has been a quiet start to the year, we are beginning to see investment bankers sharpen their pencils and a growing pipeline of potential equity fund raisings in the months ahead.
In January the IFSL RC Brown UK Primary Opportunities fund returned +3.4% compared with +4.5% for the FTSE All Share and +4.5% for the IA UK All Companies sector.
Purchases
Legal & General
L&G is one of the largest financial services and asset managers in the UK and a constituent of the FTSE 100. We purchased the shares in the secondary market at a time of general weakness in the insurance sector on the back of a profit warning by Direct Line. It was also an opportunity to deploy some cash with levels above 8% in the fund in what we consider an undervalued market. The dividend yield of over 7% we view as extremely attractive.
Sales
The small remaining holdings in underperformers Dr Martens and Agronomics were sold. The holdings in Kape Technologies and Watches of Switzerland were also trimmed on a positive update.
Cumulative Performance (Total Return %) – January 2023
| Fund/Benchmark Name | 3M to 31/01/2023 | 6M to 31/01/2023 | Year to 31/01/2023 | 3 Years to 31/01/2023 | 5 years to 31/01/2023 | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | 7.7 | 0.5 | -9.7 | 2.3 | 10.6 | 444.6 |
| Quartile Ranking IA UK All Companies | 4 | 3 | 4 | 3 | 3 | 2 |
| IA UK All Companies | 11.1 | 3.0 | -1.4 | 7.3 | 14.6 | 308.6 |
| FTSE All Share | 10.4 | 5.3 | 5.2 | 15.6 | 23.1 | 347.1 |
Source: FE: 31/01/2023
Discrete Annual Performance (Total Return %) – January 2023
| Fund/Benchmark Name | Year to 31/01/2023 | Year to 31/01/2022 | Year to 31/01/2021 | Year to 31/01/2020 | Year to 31/01/2019 |
| IFSL RC Brown UK Primary Opportunities P Acc | -9.7 | 14.3 | -0.8 | 13.0 | -4.3 |
| Quartile Ranking IA UK All Companies | 4 | 3 | 1 | 2 | 2 |
| IA UK All Companies | -1.4 | 13.9 | -4.5 | 13.2 | -5.6 |
| FTSE All Share | 5.2 | 18.9 | -7.6 | 10.7 | -3.8 |
Source: FE: 31/01/2023
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.
