Markets end 2017 at new highs

In December, IFSL RC Brown UK Primary Opportunities (+3.0%) underperformed the UK equity market (+4.8%) as markets enjoyed their strongest month of the year. The Fund performed strongly over the year returning 19.4% compared with 13.1% for the FTSE All Share and the Fund ranked in the top quartile in its sector. (IA UK All Companies)

Another busy month saw us participate in the IPO’s of Sabre Insurance and Sumo Digital, primary placings in Conviviality and Duke Royalty and a secondary sell down in Countryside Properties.

December saw a strong rebound in the UK market following weakness in November. Sufficient progress on Britain’s exit from the European Union, with a payment of €40-50bn from Britain to the EU agreed, allows talks to now move onto to the second stage and trade negotiations which are likely to be just as frought, if not more so, than before. President Trump’s tax bill was passed which has reduced the corporation tax rate in the US, and is hoped will spur the re-shoring of dollars and investment in the US economy spurring further growth.

Purchases

Sabre Insurance
Sabre is a specialist UK motor insurer focusing on higher premium, non standard policy holders, which delivers industry leading margins. The shares were purchased at IPO on an undemanding rating and a dividend yield in excess of 6%. They have made a good start by rising 18%.

Sumo Digital
Sumo is a leading global video games co-developer with long term relationships with some of the world’s largest games publishers including Sony and Sega. It is a fast growing, asset light Company with strong margins. We purchased shares at IPO with the shares making a strong debut rising over 10%.

Conviviality
An owner of off licences and convenience stores and drinks wholesalers. A Company we know well having IPO’d in 2013. We acquired our holding as part of a £30m placing to fund the acquisition of 127 convenience stores from Palmer & Harvey that had gone into administration. These stores, located in the south and south west of England, broadens their geographical area of existing sites with minimal overlap.

Duke Royalty
Duke is a long term lender, typically on a 25-30 year term, to smaller businesses in Europe. Their lending particularly appeals to capital intensive, family owned businesses who do not wish to reduce their equity holdings by allowing investment by private equity. Such long term finance is rare from traditional banks. A concept that is well developed in North America that Duke is well placed to recreate in Europe. We acquired the shares as part of a £20m placing to fund lending to 2 partners and further investment in 2 existing partners. The dividend yield is in excess of 4% and we anticipate strong dividend growth in forthcoming years.

Countryside Properties
Another Company we know well since its IPO in 2015. A housebuilder with a partnerships business providing affordable housing on behalf of local authorities and housing associations. We purchased the shares as part of a selldown by private equity at an attractive 6% discount to the prevailing market price.

Sales

Hargreaves Lansdown
Following a strong run aided by markets hitting new highs, we took some profits in order to fund other opportunities.

Premier Asset Management
Following a strong run aided by markets hitting new highs, we took some profits in order to fund other opportunities.

Eve Sleep
An unexceptional performer since IPO, and highly rated. Following a price rise and some liquidity, we took the opportunity to exit the position. Whilst we consider it an exciting Company, we are cogniscant of the ever growing competition in the online mattress industry and with markets surging, were content to exit one of our higher risk positions.

CVS
The shares were sold following a very sharp bear squeeze. The Company had issued a relatively modest warning last month that like for like growth was slowing. The shares fell sharply to oversold levels as sentiment was damaged on a highly rated stock. This month saw 2 brokers re-iterate their buy case on the same day squeezing the stock sharply higher, allowing us to exit our holding for a modest profit. As a highly rated stock where the outlook has become more uncertain, we feel content to wait on the sidelines awaiting further news flow.

Ten Entertainment
We reduced our holding following a solid market update from competitor Hollywood Bowl. Ten has seen its discount to larger rival Hollywood reduce in recent months. We remain holders of both.

Barclays
A long term holding whose performance has flattered to deceive. We took the opportunity of strong markets to exit the holding and despite the lowly valuation, feel our cash is better deployed elsewhere.

Fever-Tree
The unquestionable star performer in the portfolio. Its high rating and more volatile share price of late has led us to reduce our holding on a pre Christmas squeeze higher. We remain holders but given the lofty valuations, it is no longer a top 10 active holding.

Cumulative Performance (Total Return %)– December 2017

Fund/Benchmark Name	Year to 31/12/2017	3 Years to 31/12/2017	5 years to 31/12/2017
IFSL RC Brown UK Primary Opportunities P Acc	19.36	46.42	70.74
IA UK All Companies	13.99	33.34	68.27
FTSE All Share	13.10	32.46	62.98

Discrete Annual Performance (Total Return %) – December 2017

Fund/Benchmark Name	31/12/2012 to 31/12/2013	31/12/2013 to 31/12/2014	31/12/2014 to 31/12/2015	31/12/2015 to 31/12/2016	31/12/2016 to 31/12/2017
IFSL RC Brown UK Primary Opportunities P Acc	16.98	-0.31	7.61	13.99	19.36
IA UK All Companies	26.21	0.64	4.86	10.82	13.99
FTSE All Share	20.81	1.18	0.98	16.75	13.10

Source: FE 2018

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.