IFSL RC Brown UK Primary Opportunities | Fund Update | August 2022
August: A summer lull before the storm?
Markets failed to hold onto last month’s bear market rally as equities lost ground during August. The outlook remains a difficult one with inflation still rising (UK inflation hit 40 year highs of over 10%) and the Bank of England raised interest rates by 50bps to 1.75%. Further rises are expected here and across the world in a bid to bring down inflation. The risk of recession remains real and concerns over how consumers and businesses cope with vastly higher energy prices this winter is of great concern. We await the incoming Prime Minister’s plans for this cost of living crisis. Sterling has been particularly weak against the US dollar – beneficial for the FTSE 100 and its dollar earners, but unhelpful for the more domestically focused mid and small caps.
The UK market continues to attract the attention of overseas buyers. This month saw mid-caps, Darktrace and Microfocus and FTSE constituent Aveva, were all the subject of overseas bid interest.
As ever, we continue to have a well-diversified portfolio of 60-80 stocks across different sectors and market capitalisations. August is a traditionally quiet month for equity raisings due to the holiday season. This month we added to our holding in Saietta as part of an equity raise. We also added to the holding in GSK. The forecast dividend yield of the fund now stands at 3.3% (before costs), up from 1.8% at the start of the year.
In August the IFSL RC Brown UK Primary Opportunities fund returned -1.57% compared with -1.70% for the FTSE All Share and -3.29% for the IA UK All Companies sector.
Purchases
Saietta
Saietta is a UK based engineering company that designs electric motors for lightweight vehicles such as motorcycles. We first acquired the shares at IPO last year. We took the decision to add to our holding as part of a £20m placing which allows the company to help fund its recent joint commercialisation and development agreement with a global manufacturer and supplier of automotive components – potentially a transformational deal for the company.
GSK
GSK is a global pharmaceutical company developing vaccines and medicines to prevent and treat disease. Formerly known as GlaxoSmithKline – which last month split into two separate companies – GSK and Haleon. With the shares falling sharply in the month on concerns over potential legal cases over a drug called Zantac which was discontinued in 2019, we took the opportunity to add to our holding in what we view as a stable and attractively valued multinational company.
Sales
Given heightened market volatility and an uncertain outlook, we are content to hold a little more cash than normal. We currently have 7% of the fund in cash, awaiting new primary opportunities or to take advantage of any sharp market falls that may occur. Underperforming small cap Revolution Beauty was sold. We had reduced the holding ahead of a trading update, which proved highly disappointing, hence the sale of the remaining holding. We also trimmed holdings in AstraZeneca and BP on energy price strength.
Cumulative Performance (Total Return %) – August 2022
| Fund/Benchmark Name | 3M to 31/08/2022 | 6M to 31/08/2022 | Year to 31/08/2022 | 3 Years to 31/08/2022 | 5 years to 31/08/2022 | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | -7.2 | -8.8 | -13.9 | 8.7 | 12.4 | 433.5 |
| Quartile Ranking IA UK All Companies | 4 | 4 | 3 | 2 | 2 | 1 |
| IA UK All Companies | -5.2 | 4.7 | -10.5 | 8.1 | 11.5 | 283.6 |
| FTSE All Share | -3.6 | -1.3 | 1.0 | 12.0 | 17.8 | 317.4 |
Source: FE: 31/08/2022
Cont.
Discrete Annual Performance (Total Return %) – August 2022
| Fund/Benchmark Name | Year to 31/08/2022 | Year to 31/08/2021 | Year to 31/08/2020 | Year to 31/08/2019 | Year to 31/08/2018 |
| IFSL RC Brown UK Primary Opportunities P Acc | -13.9 | 34.6 | -6.2 | -3.5 | 7.1 |
| Quartile Ranking IA UK All Companies | 3 | 2 | 2 | 3 | 2 |
| IA UK All Companies | -10.5 | 32.4 | -8.8 | -3.2 | 6.5 |
| FTSE All Share | 1.0 | 27.0 | -12.7 | 0.4 | 4.7 |
Source: FE: 31/08/2022
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.
