IFSL RC Brown UK Primary Opportunities | Fund Update | March 2025
March: Tariffs, tariffs and UK market outperformance
March proved a volatile month with a backdrop of US tariffs, European defence and the Chancellor’s spring statement providing the most notable talking points.
The FTSE 100 hit a new all-time high as the defence sector rallied hard on the need for greater spending on defence by European countries following President Trump’s assertion that the US was no longer willing to fund Ukraine’s war effort indefinitely. The UK is expected to increase defence spending to 2.5% of GDP by 2027 and Germany announced that defence spending above 1% of GDP would be excluded from its deficit rules.
President Trump’s increasingly erratic trade policies and use of tariffs has unnerved global stock markets, with the US suffering the largest falls as concerns over its slowing growth and the impact tariffs on imported goods to the US and the potential for retaliation by other countries may have on the economy. Since hitting a record high on 19 February, the S&P 500 has seen a dramatic rotation out of the ‘Magnificent 7’ technology stocks. Whilst only falling 4.4% in the quarter, it proved to be its worst quarter relative to the rest of the world for 23 years.
Back in the UK, the Chancellor’s spring statement saw the Office for Budget Responsibility halve its economic growth forecast for 2025 to 1%. On a more positive note, inflation fell to 2.8% in February from 3.0%, increasing expectations of an interest rate cut, potentially as early as May.
We have written regularly about the significant level of M&A in recent years on the UK market. The first quarter of 2025 has seen 15 companies bid for, at an average premium of 36% to the undisturbed share price.* Valuations of mid and small cap companies in the UK in particular remain modest, and M&A will continue whilst this remains the case.
We added XP Power to the portfolio as part of an equity fund raise and also took advantage of market weakness to add Diploma to the portfolio.
In March, the IFSL RC Brown UK Primary Opportunities fund returned -2.0% compared with -2.3% for the FTSE All Share and -3.3% for the IA UK All Companies sector, all on a total return basis.
*Source: Peel Hunt
Purchases
XP Power
XP Power is a manufacturer and supplier of critical power supplies used across a variety of industries such as healthcare, industrial technology and semiconductor manufacturing. The shares were acquired as part of an equity fund raise in order to reduce the company’s debt profile and strengthen the company’s balance sheet during what is proving to be a tough economic environment. Whilst management have acknowledged the outlook for this is uncertain and a wide range of potential scenarios exist, we consider XP to be a high quality company that only last year turned down an offer by a suitor at double the current share price.
Diploma
Diploma is an industrial distribution company that supplies technical products across three main sectors such as cabling and wiring and medical equipment to hospitals and laboratories. We acquired the shares in the open market at a time of market distress, caused by President Trump’s tariff proposals. The company has an excellent track record and is a member of the FTSE 100.
Sales
We trimmed our holdings in high yielders Vodafone and M&G as both have shown considerable strength in a weaker market.
Cumulative Performance (Total Return %) – To 31 March 2025
| Fund/Benchmark Name | 3M | 6M | 1Y | 3Y | 5Y | 10Y | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | 2.5 | 1.0 | 8.6 | 2.6 | 51.2 | 72.9 | 505.9 |
| Quartile Ranking IA UK All Companies | 2 | 2 | 2 | 3 | 3 | 2 | 2 |
| IA UK All Companies | 0.2 | -1.1 | 5.1 | 11.0 | 61.4 | 58.6 | 354.0 |
| FTSE All Share | 4.5 | 4.1 | 10.5 | 23.3 | 76.6 | 81.7 | 428.2 |
Source: FE: 31/03/2025
Discrete Annual Performance (Total Return%) – To 31 March 2025
| Fund/Benchmark Name | Year to 31/03/2025 | Year to 31/03/2024 | Year to 31/03/2023 | Year to 31/03/2022 | Year to 31/03/2021 |
| IFSL RC Brown UK Primary Opportunities P Acc | 8.6 | 5.0 | -10.0 | 3.7 | 42.2 |
| Quartile Ranking IA UK All Companies | 2 | 4 | 4 | 3 | 2 |
| IA UK All Companies | 5.1 | 7.7 | -1.9 | 5.4 | 38.0 |
| FTSE All Share | 10.5 | 8.4 | 2.9 | 13.0 | 26.7 |
Source: FE: 31/03/2025
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.
