March update – markets remain under pressure over US protectionist fears

In March, IFSL RC Brown UK Primary Opportunities (-3.14%) underperformed the UK equity market (-1.82%). The Fund is a top quartile performer over one and three years.

We participated in placings in Sirius Real Estate and Restore. There were IPO’s in JTC and SimplyBiz, a secondary sell down in Burford Capital and we purchased John Laing Group as part as part of a rump placing following its rights issue.

We unfortunately had a holding in Conviviality which was not conducive to performance this month. Following a profit warning, within days the new Finance Director had uncovered further nasties leading to a suspension of the shares. Whilst the situation is fluid, we anticipate receiving little or no value for our holding. A reminder if ever it was needed as to why we hold a well diversified portfolio of around 70 stocks.

March again proved a difficult month for UK equities. President Trump saw the resignation of his most senior economic adviser, Gary Cohn. His increasingly protectionist rhetoric and the announcement of trade tariffs on some Chinese goods, which saw a retaliation by China, has unsettled markets. The concern is that it leads to a full blown trade war which could harm global growth.

The UK agreed a transition agreement with EU which will last for 21 months after we leave next March. Sterling strengthened as a result.

The increasing M&A activity with the likes of Fenner and Hammerson being targeted by overseas buyers does provide evidence of the value emerging in UK assets which have rarely been so out of favour. We continue to have some concerns over US valuations particularly amongst the larger technology names which have enjoyed meteoric rises. We also see a good flow of primary opportunities and as ever investing in good quality companies at attractive levels remains a focus.

Purchases

Sirius Real Estate
Sirius is a property company with offices and industrial parks in Germany. The shares were acquired as part of a £35m raise to fund a portfolio of assets. The discount of 11% was particularly attractive to where they had been trading and allowed us to buy at a discount to net asset value. A dividend yield in excess of 5% is also attractive.

Restore
A document storage and management company we know well from previous fund raises. We purchased the shares as part of a placing to fund the acquisition from TNT of its storage business, its largest contract an attractive one with the MoD.

JTC
JTC is an administrator of funds and back office support to over 5000 clients across fund group, legal and accountancy industries. The shares were purchased at IPO and we like the high quality recurring revenue of the business. We anticipate the group to use its listed status to make attractive bolt on acquisitions. The shares trade at a material discount to Sanne which we also hold.

SimplyBiz
SimplyBiz is a leading provider of compliance and business services to over 3000 financial advisers in the UK. The shares were purchased at IPO and offers defensive growth in an industry faced with ever greater regulation.

Burford Capital
Burford is the world’s largest provider of litigation finance for law firms and companies from start-ups to global companies in order to help them manage their legal costs. The shares were acquired as part of a sell down by management at a 9% discount to where they had been trading.

John Laing Group
JLG builds, invests and manages infrastructure projects globally. We acquired the shares as part of a rump placing following a rights issue to raise additional funds for further projects. Trading at a double digit discount to net asset value and a dividend yield of over 3.5%, we viewed it as an attractive entry point.

Sales

Randall & Quilter
A relatively defensive re-insurance business that has performed solidly for us and held up well in the recent market sell off. We felt there was greater upside in new primary opportunities.

United Utilities
A long term holding that had performed exceptionally and where we have taken profits over the years. More recently it has de-rated along with other bond proxies. As a UK centric stock and the threat of further regulation and even nationilisation under a Corbyn lead government, we felt the tail risk too great.

Medica
Following recent results which were marginally below expectations, we were concerned over growing margin pressure, hence we took profits.

Everyman Media
Following an encouraging set of results we took the opportunity of some liquidity in the stock to take profits and reduce our holding.

Proactis
A modest holding that had performed well, we took the opportunity of recent strength in volatile markets to realise profits.

Charter Court Financial Services
Following results, we used a share price rise to take some profits. We remain holders.

TI Fluid Systems
One of our larger holdings and an unexciting performer since IPO last year. We took the opportunity to reduce our holding to fund other primary opportunities but remain invested as the stock continues to look relatively cheap.

Gamma Communications
One of our most successful current investments rising almost 300% since we first purchased at IPO in 2014, we reduced our holding on results given the relatively full current valuation.

Sanne
We used the relative recent share price strength to reduce our largest active holding on valuation grounds and because we have bought into competitor JTC, it was prudent to reduce our exposure. Another of our star performers having risen 250% since we first purchased at IPO in 2015.

Cumulative Performance (Total Return %)– March 2018

Fund/Benchmark Name	Year to 31/03/2018	3 Years to 31/03/2018	5 years to 31/03/2018
IFSL RC Brown UK Primary Opportunities P Acc	5.60	31.71	54.42
IA UK All Companies	2.65	18.16	42.78
FTSE All Share	1.25	18.63	37.57

Discrete Annual Performance (Total Return %) – March 2018

Fund/Benchmark Name	31/03/2017 to 31/03/2018	31/03/2016 to 31/03/2017	31/03/2015 to 31/03/2016	31/03/2014 to 31/03/2015	31/03/2013 to 31/03/2014
IFSL RC Brown UK Primary Opportunities P Acc	5.60	24.98	-0.21	3.31	13.50
IA UK All Companies	2.65	17.95	-2.41	5.77	14.24
FTSE All Share	1.25	21.95	-3.92	6.57	8.81

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. R.C. Brown and Marlborough are authorised and regulated by the FCA. Marlborough 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