IFSL RC Brown UK Primary Opportunities | Fund Update | May 2025
May: Tariff de-escalation…. for now
Global equities made strong progress as President Trump pressed the pause button on tariffs following early April’s sharp falls post the ‘Liberation Day’ tariffs announced.
Whilst still a fluid situation, tariffs on most Chinese goods imported into the US have been reduced to 30% and 10% from the rest of the world. It is likely stock market falls and rising bond yields forced the Trump administration into a climb down. Equity markets’ strong reaction to the de-escalation suggest they are expecting a trade deal to be thrashed out between the world’s two largest economies. What is apparent to us, is that Trump’s erratic style has changed the narrative in relation to the US, with growth forecasts being cut, and undermining the US’s safe-haven reputation. Moody’s became the last of the big three rating agencies to downgrade the US’s triple-A debt rating last month. With the past decade seeing capital flow into US equities, we do believe that asset allocators will now be looking to reduce exposure to the asset class, which remains highly valued. We anticipate Europe and the UK being beneficiaries of this rotation, where valuations are much more modest.
The Bank of England cut interest rates by a quarter of a percentage point to 4.25%. Inflation jumped to 3.5% though this is widely seen as transitory given the rise in national insurance and higher minimum wage. Underlying trends still point to lower inflation, but future data will be closely watched by the Bank before further rates cuts are announced. Retail sales growth in April reached its highest level since before the pandemic, providing evidence that the UK consumer is in reasonable shape.
Our monthly report would not be complete without a comment on M&A in the UK equity market. Deliveroo and H&T both received takeover offers which will likely further the de-equitisation of the UK market as both were acquired by larger US rivals. This will continue whilst valuations remain modest though we are encouraged by the growing government narrative to support the London market, and we are aware of a pipeline of companies that are looking to come to the market. Accountancy firm, MHA, which we purchased last month at IPO has made a solid start to its listed journey, already deploying some of the proceeds raised to acquire firms in Southern Europe.
We participated in no new primary opportunities in the month but did take advantage of the weakness in Marks & Spencer to initiate a holding.
In May, the IFSL RC Brown UK Primary Opportunities fund returned 4.2% compared with 4.1% for the FTSE All Share and 5.1% for the IA UK All Companies sector, all on a total return basis.
Purchases
Marks & Spencer is one of the UK’s largest and oldest retailers. In recent years it has turned around its performance and its growing food retail business has been taking market share from up market rival Waitrose. The shares have fallen in the past month due a cyber security attack which has resulted in the company pausing online orders and taking an expected £300m hit to profits. Whilst we cannot be sure when online sales will be back on stream, recent company results were encouraging, and we believe the recent pull back provides an opportunity to purchase a high-quality retailer on a modest rating.
Sales
We used market strength to trim exposure to the financials sector reducing holdings in M&G, AJ Bell and Aviva. We also trimmed Haleon.
Cumulative Performance (Total Return %) – To 31 May 2025
| Fund/Benchmark Name | 3M | 6M | 1Y | 3Y | 5Y | 10Y | Since Inception (28/05/1997) |
| IFSL RC Brown UK Primary Opportunities P Acc | 3.0 | 6.6 | 9.2 | 10.8 | 39.2 | 72.7 | 536.7 |
| Quartile Ranking IA UK All Companies | 2 | 2 | 2 | 4 | 3 | 2 | 2 |
| IA UK All Companies | 2.5 | 4.8 | 6.0 | 18.9 | 50.7 | 59.2 | 381.2 |
| FTSE All Share | 1.6 | 7.3 | 9.4 | 26.8 | 69.0 | 80.7 | 448.8 |
Source: FE: 31/05/2025
Discrete Annual Performance (Total Return%) – To 31 May 2025
| Fund/Benchmark Name | Year to 31/05/2025 | Year to 31/05/2024 | Year to 31/05/2023 | Year to 31/05/2022 | Year to 31/05/2021 |
| IFSL RC Brown UK Primary Opportunities P Acc | 9.2 | 10.1 | -7.9 | -5.0 | 32.3 |
| Quartile Ranking IA UK All Companies | 2 | 4 | 4 | 3 | 2 |
| IA UK All Companies | 6.0 | 13.4 | -1.1 | -1.5 | 28.6 |
| FTSE All Share | 9.4 | 15.4 | 0.4 | 8.3 | 23.1 |
Source: FE: 31/05/2025
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.
