With markets buoyant the number of primary opportunities has increased

In November, IFSL RC Brown UK Primary Opportunities (-1.4%) outperformed the UK equity market (-1.6%).

Another busy month saw us participate in the IPO’s of Contour Global and Ten Lifestyle Group. Despite relatively buoyant stock markets, investors remain cautious towards committing new money to the IPO market. This self policing does, we believe, mean we are obtaining some high quality companies at attractive prices, which should reward us well in the future once the company establishes itself as a listed business. We also participated in primary placings in IQE and Treatt. We made a rare purchase in the secondary market by adding BHP Billiton to the portfolio.

November proved to be the second weakest month for the UK equity market year to date. Despite the FTSE 250 reaching a high early in the month, a sharp sell off soon occurred on concerns over Brexit negotiations and the potential negative impact of a ‘hard’ Brexit. By the end of the month these fears had calmed as sterling hit a two month high against the dollar. A rising pound typically translates into a falling FTSE as much of the index’s constituents report in dollars.

Purchases

Contour Global

Contour is an owner and operator of power plants spread across 19 countries. The business reminds us of International Power, a business that performed exceptionally well for the Fund until its takeover in 2012. We were attracted by the long term contracts of Contour, its international earnings and a dividend yield of 4% that is forecast to grow.

IQE

IQE is the global leader in the design and manufacture of advanced semiconductor wafer products. Its products are used by global companies and its face recognition technology features in the new Iphone X. We purchased the shares as part of a fund raising to invest in products to scale the business further.

BHP Billiton

One of the largest miners and a constituent of the FTSE 100. We used the pull back in miners to make the unusual move of buying a company in the secondary market for only the second time this year. We have seen relatively few primary opportunities to invest in mining companies this year and typically consider small cap mining too high risk. We consider BHP to hold high quality assets and we believe with a strong global economy, commodity prices are likely to rise further. The Company also pays an attractive dividend yield in excess of 4% and has significantly less debt than before the credit crisis, so is better positioned in the event of a downturn.

Ten Lifestyle Group

Ten is a fast growing lifestyle management & concierge business aimed at high net worth individuals. The shares were purchased at IPO and the proceeds will be used to grow the business internationally.

Treatt

Treatt is a manufacturer of flavourings and fragrances; its clients being the major global beverage and fragrance manufacturers. The shares were purchased as part of a £21m raise to fund a state of the art head office and laboratories in the UK and a new facility in the US.

Sales

UP Global Sourcing

Following a recent profit warning where the shares fell sharply, we used some price stability to exit a relatively small holding. With the outlook for UK consumer spending remaining uncertain, we anticipate it will be some time before the shares re-rate, hence we felt the money better invested elsewhere.

Convatec

A surprise profit warning saw a sharp share price fall which has damaged sentiment in the Company, still a relative new comer to the stock market. We took the opportunity to sell following a broker upgrade which squeezed the price higher. We are content to sit on the sidelines for the time being and await further developments, mindful there may be primary opportunities in the medium term.

OneSavings Bank

We took the opportunity to sell following a solid trading update and realise a short term gain in excess of 10%. We continue to have exposure to the UK challenger bank market through Charter Court Financial Services.

888 Holdings

The shares were sold during a time of volatility in the market where we required cash for new primary opportunities. The shares had held up well, outperforming a falling market. A good company but in a sector that by nature we are nervous about given the continual threat of regulation in the gambling industry.

Ultra Electronics

We sold our holding following a disappointing and unexpected profit warning citing delays in UK defense spending. The CEO also resigned. We awaited a modest recovery in the shares before exiting, mindful that one profit waring is often followed by a second, applying our ‘first cut is often the cheapest’ philosophy.

Redrow

With only a small holding left following previous profit taking, we took the opportunity to sell our remaining holding following a modest rise in the days after the budget which was seen as broadly supportive to the housebuilders.

On The Beach

We trimmed our holding following a share price rise on a positive set of results. The shares continue to offer reasonable value given the growth rate.

Cumulative Performance (Total Return %)– November 2017

Fund/Benchmark Name	Year to 30/11/2017	3 Years to 30/11/2017	5 years to 30/11/2017
IFSL RC Brown UK Primary Opportunities P Acc	21.45	41.87	69.41
IA UK All Companies	15.13	28.37	65.79
FTSE All Share	13.35	25.22	57.09

Discrete Annual Performance (Total Return %) – November 2017

Fund/Benchmark Name	30/11/2012 to 30/11/2013	30/11/2013 to 30/11/2014	30/11/2014 to 30/11/2015	30/11/2015 to 30/11/2016	30/11/2016 to 30/11/2017
IFSL RC Brown UK Primary Opportunities P Acc	17.56	1.58	7.26	8.91	21.45
IA UK All Companies	25.05	3.28	4.87	6.32	15.13
FTSE All Share	19.8	4.71	0.64	9.77	13.35

Source: FE 2018

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.