IFSL RC Brown UK Primary Opportunities | Fund Update | January 2024
January: Uninspiring start to 2024 – UK valuations remain attractive
The UK market was unable to maintain the strength it had enjoyed the previous two months, underperforming other major markets, notably the US, which continues to be buoyed by expectations of interest rate cuts and the large cap technology stocks.
UK inflation unexpectedly rose to 4.0% (from 3.9%), causing a sell off in the UK market before recovering some of the losses late in the month. Whilst we anticipate that inflation will continue its downward trend, any interest rate cuts in the UK are likely to be in the second half of the year as the path to the 2% inflation target is unlikely to be smooth.
The Israel/Hamas & Ukraine/Russia wars continue to act as a drag on investor confidence and highlight the delicate state of global geopolitics. 2024 is also a significant year for elections and could contribute further to political uncertainty. Donald Trump is likely to be the Republican candidate as he seeks a return to the White House.
Pennon was introduced to the portfolio following a substantial equity fund raise. 2022 and 2023 were both quiet years for equity fund raisings, and whilst we do not anticipate a return to the peak years of 2020 and 2021, greater market confidence is likely to lead to more fund raisings as companies seek growth capital.
In January the IFSL RC Brown UK Primary Opportunities fund returned -1.3% compared with -1.3% for the FTSE All Share and -0.9% for the IA UK All Companies sector, all on a total return basis.
Purchases
Pennon is a water and waste service company serving over 4 million customers predominantly across the West of England. We acquired the shares as part of an £180m placing to fund the acquisition of Sutton and East Surrey water. The shares were acquired at a modest discount and offer an attractive dividend yield of over 6%. With a market capitalisation of £2bn, it is a constituent of the FTSE 250.
Sales
We took profits in Sigmaroc following its very strong performance post its recent fund raising with the shares rallying more than 20%. We also trimmed the holdings in Whitbread and JTC on strength.
Cumulative Performance (Total Return %) – To 31 January 2024
| Fund/Benchmark Name | 3M | 6M | 1Y | 3Y | 5Y | 10Y | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | 7.1 | 1.9 | 0.2 | 3.4 | 15.8 | 65.2 | 455.6 |
| Quartile Ranking IA UK All Companies | 3 | 2 | 4 | 4 | 4 | 2 | 2 |
| IA UK All Companies | 9.1 | 1.9 | 1.9 | 14.5 | 23.7 | 58.2 | 316.3 |
| FTSE All Share | 6.2 | 1.1 | 1.9 | 27.5 | 30.4 | 71.2 | 355.6 |
Source: FE: 31/01/2024
Discrete Annual Performance (Total Return %) – 31 January 2024
| Fund/Benchmark Name | Year to 31/01/2024 | Year to 31/01/2023 | Year to 31/01/2022 | Year to 31/01/2021 | Year to 31/01/2020 |
| IFSL RC Brown UK Primary Opportunities P Acc | 0.2 | -9.7 | 14.3 | -0.8 | 13.0 |
| Quartile Ranking IA UK All Companies | 4 | 4 | 3 | 1 | 2 |
| IA UK All Companies | 1.9 | -1.4 | 13.9 | -4.5 | 13.2 |
| FTSE All Share | 1.9 | 5.2 | 18.9 | -7.6 | 10.7 |
Source: FE: 31/01/2024
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.
