IFSL RC Brown UK Primary Opportunities | Fund Update | June 2024
June: Two IPOs added to the portfolio
UK equities gave back some of their recent gains along with other European markets which sold off on a strong showing by anti-EU far right parties in the European elections and a surprise snap French election being called by President Macron. The general election on July 4 was the outcome the polls and market expected – a sizeable Labour majority. We view a centrist stable new government as a positive for UK equities, particularly with the ongoing rise of more extreme parties in mainland Europe and the less orthodox economic policies they may look to introduce. The outcome of the US election in November is also far from certain with the polls neck and neck.
UK inflation fell back to its 2% target for the first time in nearly two years whilst the Bank of England again held interest rates. The jury is out on the prospects of a rate cut in August, but at least one cut is expected before the end of the year.
There were signs of life in what has been a moribund London IPO market so far this year. We participated in the IPO’s of Raspberry Pi and AOTI, both exciting growth companies. The IPO market is in an unforgiving mood as Special Opportunities REIT, a property company, failed to raise sufficient funds and pulled its IPO. We research most companies that come to the London market with a market capitalisation in excess of £100m, and whilst we will only invest in a minority of these, we consider a sensibly priced IPO of a high quality company with growth prospects and a strong management team, as an excellent entry point. In our experience if the company delivers on its intentions, it will provide an above average return for investors.
We also added to the holding in BP, taking advantage of oil price weakness.
In June, the IFSL RC Brown UK Primary Opportunities fund returned -0.4% compared with 1.2% for the FTSE All Share and -1.2% for the IA UK All Companies sector, all on a total return basis.
Purchases
Raspberry Pi is a UK technology company that designs high performance, low cost, single board computers. Historically the main use of its computers was for education purposes, helping students learn to programme. Increasingly, as the IoT (internet of things) emerges, and more devices become connected, there is an ever greater need for reliable, high quality, low cost, computers. We acquired the shares as part of a heavily over subscribed IPO which have seen the shares rise over 40%. On the current valuation, we would anticipate it entering the FTSE 250.
AOTI (Advanced Oxygen Therapy Inc) is a medical device company helping to effectively treat people with hard to heal wounds and in particular people with diabetes who are particularly at risk of foot ulcers that if not treated can lead to amputation. A fast growing company focused on the US market, the money raised at IPO will help it expand into new states in the US and into Europe.
Sales
We trimmed the large holdings in London Stock Exchange and RELX on strength.
Cumulative Performance (Total Return %) – To 30 June 2024
| Fund/Benchmark Name | 3M | 6M | 1Y | 3Y | 5Y | 10Y | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | 4.0 | 5.0 | 9.6 | -3.4 | 14.9 | 73.8 | 480.5 |
| Quartile Ranking IA UK All Companies | 2 | 3 | 3 | 4 | 4 | 2 | 2 |
| IA UK All Companies | 3.8 | 6.8 | 12.6 | 9.4 | 24.3 | 66.8 | 348.6 |
| FTSE All Share | 3.7 | 7.4 | 13.0 | 23.9 | 30.9 | 77.8 | 396.0 |
Source: FE: 30/06/2024
Discrete Annual Performance (Total Return%) – To 30 June 2024
| Fund/Benchmark Name | Year to 30/06/2024 | Year to 30/06/2023 | Year to 30/06/2022 | Year to 30/06/2021 | Year to 30/06/2020 |
| IFSL RC Brown UK Primary Opportunities P Acc | 9.6 | -1.1 | -10.9 | 31.1 | -9.3 |
| Quartile Ranking IA UK All Companies | 3 | 4 | 3 | 2 | 2 |
| IA UK All Companies | 12.6 | 6.2 | -8.5 | 27.7 | -11.0 |
| FTSE All Share | 13.0 | 7.9 | 1.6 | 21.5 | -13.0 |
Source: FE: 30/06/2024
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.
