IFSL RC Brown UK Primary Opportunities | Fund Update | August 2023
August: Summer lull
The UK and global equities failed to build on July’s gains. Concerns over the economic outlook for China’s economy and its faltering property market coupled with a Fitch credit agency downgrade of the US, weighed on markets. At home, the Bank of England raised rates by 0.25% (to 5.25%), a 14th consecutive rise and now stands at 15 year highs. The latest inflation figure showed inflation continuing to fall – CPI stands at 6.8%, though still well above the 2% target which the bank now does not expect to hit until early 2025. Whilst we believe interest rates in the UK are close to peaking, expectations of rate cuts have been pushed out to late 2024.
A predictably quiet month given holiday season for equity fund raisings. We did however add United Utilities to the portfolio given market weakness.
UK equity valuations remain at historic lows compared with the US. M&A remains a theme as overseas buyers pick off undervalued companies.
In August the IFSL RC Brown UK Primary Opportunities fund returned -2.4% compared with -2.5% for the FTSE All Share and -2.2% for the IA UK All Companies sector.
Purchases
United Utilities
Water companies’ share prices have been marked down as a result of the well-publicised issues facing the privately owned Thames Water. Whilst unhelpful for sentiment, given the discipline and lower debt levels of being a listed company, we view the recent sell off as overdone and took the opportunity to add a company with stable earnings and an attractive dividend yield of over 5% to the portfolio.
Sales
The small remaining holding in Watches of Switzerland was sold as we sought to reduce exposure to the consumer and in particularly to high ticket items such as luxury watches. The timing proved prescient as following our sale, the shares were heavily marked down on news that Rolex had bought a competitor, resulting in the luxury watch manufacturer entering the retail market for the first time.
Cumulative Performance (Total Return %) – To 31 August 2023
| Fund/Benchmark Name | 3M | 6M | 1Y | 3Y | 5Y | 10Y | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc |
-1.3 | -5.1 | -2.0 | 13.6 | 2.9 | 69.6 | 422.8 |
| Quartile Ranking IA UK All Companies |
3 | 4 | 4 | 3 | 3 | 2 | 2 |
| IA UK All Companies | -0.1 | -3.8 | 4.1 | 23.4 | 9.0 | 60.1 | 299.5 |
| FTSE All Share | 1.1 | -3.2 | 5.2 | 35.0 | 18.4 | 70.6 | 339.3 |
Source: FE: 31/08/2023
Discrete Annual Performance (Total Return %) – 31 August 2023
| Fund/Benchmark Name | Year to 31/08/2023 | Year to 31/08/2022 | Year to 31/08/2021 | Year to 31/08/2020 | Year to 31/08/2019 |
| IFSL RC Brown UK Primary Opportunities P Acc |
-2.0 | -13.9 | 34.6 | -6.2 | -3.5 |
| Quartile Ranking IA UK All Companies |
4 | 3 | 2 | 2 | 3 |
| IA UK All Companies | 4.1 | -10.5 | 32.4 | -8.8 | -3.2 |
| FTSE All Share | 5.2 | 1.0 | 27.0 | -12.7 | 0.4 |
Source: FE: 31/08/2023
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.
