RC BROWN UK PRIMARY OPPORTUNITIES: The minnow making waves from the floats
The RC Brown UK Primary Opportunities investment vehicle is a bit different from most conventional funds that attempt to extract returns from the UK stock market.
He makes his money by investing in companies that are looking to raise capital to expand their business – or have decided to list on the London Stock Exchange.
It’s a particular investment approach that underpins the way Bristol-based RC Brown manages the £340m entrusted to it by clients. It’s also proving to be a quiet success, judging by the fund’s performance.
Over the past one, three and five years, it has matched or surpassed the FTSE All-Share with returns of 16%, 34% and 50% respectively. Over the same period, the FTSE posted returns of 16, 25 and 29%.
The fund, a £28million minnow, has been managed by Oliver Brown, son of RC Brown founder, since May 2013.
The fund’s unusual investment position, however, has been in place since it was launched in early 1996 by father Bob, who is still involved in key fund decisions. Oliver Brown says the approach is to reduce investment risk rather than buying new shares in an initial public offering (IPO) in hopes of making a quick profit.
He explains: “When a company raises funds, through an IPO or a tranche of new shares, it must open its management books to the public.
“As a buyer, this means you make an investment decision with a good understanding of the company’s finances – and therefore reduce the risk of being caught off guard by bad guys.” It’s not foolproof, but it works most of the time.
Brown says the fund’s biggest hit to date has been beverage company Fever-Tree. He bought his shares when they were floating at £1.34 per share at the end of 2014, eventually selling at a final price of £38 in September 2018. The shares now stand at around £26.
There have been a few banana peels along the way, including drinks retailer Conviviality which went into administration in April 2018, five years after being introduced to the alternative investment market.
Still, Brown says he can normally get a feel for a company’s success within six months of going public. “If a company doesn’t hit the six- and 12-month financial numbers it gave in the prospectus, it usually raises a red flag,” he says.
Recent IPOs of companies Brown has bought stock in include radiator maker Stelrad. Its shares were offered at a price of £2.15 last November.
“Equities haven’t done anything so far,” Brown says. “But the company will in time benefit from government support for heat pumps with grants available for homeowners to install them.”
Saietta, an engineering company benefiting from the move towards electric vehicles, was another buy for the fund last May. Its shares have since risen more than 80%. “It’s an exciting business with good management,” says Brown.
RC Brown UK Primary Opportunities shares can be purchased through most major investment platforms. Its stock exchange identification code is B8HGN522 and the annual charges are 0.87%. With an annual income of just over one percent, it is not suitable for income seekers.
One last word. Brown supports The Mail on Sunday’s campaign to ensure that retail investors can participate in all IPOs on the same terms as large institutional investors. “Five to ten percent of a company’s stock when it goes public should be available to retail investors,” he adds.