IFSL RC Brown UK Primary Opportunities | Fund Update | July 2023
July: Treading a fine line.
UK markets drifted lower in the first half of the month before rallying on a lower than anticipated annual inflation print of 7.9% (falling from 8.7%). Energy and food price inflation continues to fall and is expected to fall further. Expectations are for the Bank of England to still raise interest rates at the next meeting in August, but by 25bps rather than the 50bps some had forecast before the latest print.
We again saw a reasonable level of primary market activity although remain highly selective when adding new companies to the portfolio. We invested in London’s largest IPO of the year, CAB Payments and participated in a placing in Lok N Store.
UK equity valuations remain at historic lows compared with the US. M&A remains a theme as overseas buyers pick off undervalued companies. Dechra Pharmaceuticals takeover approach by private equity was approved by shareholders.
In July the IFSL RC Brown UK Primary Opportunities fund returned 1.1% compared with 2.6% for the FTSE All Share and 2.5% for the IA UK All Companies sector. The fund failed to fully participate in the rally that was led by UK domestic focused shares such as housebuilders which we have limited exposure to.
Purchases
CAB Payments is a business-to-business foreign exchange and payments business, specialising in facilitating payments to emerging markets from the developed market. Currently banks do 80-85% of such transactions in what is a fragmented market – specialists such as CAB are expected to continue to grow market share. The company was founded in 2015, growing revenue to over £100m in 2022. We purchased the shares at IPO in what is a difficult market for IPOs with the shares struggling to make headway as yet. We consider the shares modestly valued for a company with an attractive growth rate and high margins.
Lok N Store is the UK’s 5th largest storage site with 42 sites and a further 10 in the pipeline which will increase its available space by over a third. We acquired the shares as part of a placing to fund their expansion at a 9% discount to the share price before the placing. We consider it to be a high-quality company with a strong track record.
Sales
In a quiet month for sales, we trimmed our holdings in Elixirr, Dunelm and Watches of Switzerland on strength and also pared back our UK bank exposure marginally by reducing our holding in Lloyds Bank to 2.5% of the portfolio.
Cumulative Performance (Total Return %) – 31 July 2023
| Fund/Benchmark Name | 3M | 6M | 1Y | 3Y | 5Y | 10Y | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities – P Acc | -2.1 | -1.7 | -1.2 | 19.3 | 5.0 | 71.9 | 435.6 |
| Quartile Ranking – IA UK All Companies | 4 | 4 | 4 | 3 | 3 | 2 | 2 |
| IA UK All Companies | -0.7 | 0.0 | 3.0 | 30.1 | 10.0 | 62.5 | 308.4 |
| FTSE All Share | -1.2 | 0.8 | 6.1 | 41.8 | 18.1 | 71.1 | 350.5 |
Source: FE: 31/07/2023
Discrete Annual Performance (Total Return %) – 31 July 2023
| Fund/Benchmark Name | Year to 31/07/2023 | Year to 31/07/2022 | Year to 31/07/2021 | Year to 31/07/2020 | Year to 31/07/2019 |
| IFSL RC Brown UK Primary Opportunities – P Acc | -1.2 | -10.2 | 34.5 | -12.5 | 0.6 |
| Quartile Ranking – IA UK All Companies | 4 | 3 | 2 | 2 | 3 |
| IA UK All Companies | 3.0 | -4.5 | 32.3 | -14.5 | -1.2 |
| FTSE All Share | 6.1 | 5.5 | 26.6 | -17.8 | 1.3 |
Source: FE: 31/07/2023
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.
