IFSL RC Brown UK Primary Opportunities | Fund Update | January 2025

4th February 2025

January: A bright start to 2025 as UK equities hit new highs

2025 saw a strong start to the year, despite a US artificial intelligence related technology sell off. The FTSE 100 proved particularly strong, closing at record highs. CPI inflation at 2.5% in December was marginally lower than expectations providing fuel to the bulls that there will be multiple interest rate cuts this year. Earlier in the month, 30-year gilt yields rose to their highest level in more than 25 years on concerns over the impact President Trump’s potential trade policies may have on UK growth, which is required to fund this Labour government’s spending plans.

According to a recent study published by EY-Parthenon, 19% of London listed companies issued a profit warning in 2024, the third highest this century, exceeded only in 2001 and 2020. Businesses are also cutting jobs at the fastest rate since the financial crisis (excluding the Covid-19 pandemic). Whilst on the face of it these are not encouraging statistics, it does highlight the substantial caution amongst UK Plcs and modest expectations. In our view, it will not take much of an uptick in growth and expectations to drive this modestly valued UK market higher.

2024 saw an upturn for equity fund raisings on the UK market, with over £16bn raised (compared to £8bn in 2023), albeit equity raisings remain modest compared to the last decade.  Much has been written about the lack of fund raisings and IPOs in London in recent years and a number of companies switching their primary listing to the US. Clearly this is of some concern, but London remains one of the largest exchanges in the world and there is renewed belief that 2025 will be a strong year for equity fund raisings and a more buoyant IPO market. The recent reforms to the listing rules alongside a more stable domestic political backdrop, we believe provides grounds for a renaissance in the UK equity market.

We modestly added to the holding in Haleon as part of a secondary sell down.

In January, the IFSL RC Brown UK Primary Opportunities fund returned 4.2% compared with 5.5% for the FTSE All Share and 4.2% for the IA UK All Companies sector, all on a total return basis.

***Stock in focus***

Dowlais

This FTSE 250 automotive engineering company has agreed a £1.2bn takeover by US listed American Axle & Manufacturing. The proposed deal is a combination of cash and shares in the acquirer. Whilst the shares rose around 10% on the news, they are currently trading more than 15% below the offer value, suggesting some scepticism that it will win shareholder support given the Company’s lowly valuation, even after the recent share price strength.

Purchases

No new companies were added to the portfolio this month.

Sales

We trimmed the holdings in Lloyds, Raspberry Pi and BP on strength. Underperformer Franchise Brands was sold following a disappointing update. The Fund’s cash level is above 5% as we anticipate some upcoming primary opportunities.

Cumulative Performance (Total Return %) – To 31 January 2025

Fund/Benchmark Name 3M 6M 1Y 3Y 5Y 10Y Since Inception (28/05/1997)
IFSL RC Brown UK Primary Opportunities P Acc 5.2 2.3 12.9 2.1 15.7 80.7 515.7
Quartile Ranking IA UK All Companies 3 3 3 4 3 2 2
IA UK All Companies 5.0 1.6 13.4 13.9 24.0 69.3 372.0
FTSE All Share 6.9 4.3 17.1 25.5 37.9 87.1 433.4

Source: FE: 31/01/2025

Discrete Annual Performance (Total Return%) – To 31 January 2025

Fund/Benchmark Name Year to 31/01/2025 Year to 31/01/2024 Year to 31/01/2023 Year to 31/01/2022 Year to 31/01/2021
IFSL RC Brown UK Primary Opportunities P Acc 12.9 0.2 -9.7 14.3 -0.8
Quartile Ranking IA UK All Companies 3 4 4 3 1
IA UK All Companies 13.4 1.9 -1.4 13.9 -4.5
FTSE All Share 17.1 1.9 5.2 18.9 -7.6

Source: FE: 31/01/2025

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.