London-based boutique RWC Partners has announced the forthcoming launch of a high conviction UK equity income fund next October to address investors’ demand.
The fund will be managed by equity value veteran managers Nick Purves and Ian Lance. It will seek to exploit valuation opportunities arising from market overreactions and over-emphasis on short-term company and macro considerations.
Relying on a high conviction intrinsic value strategy, the fund will hold 25 to 45 UK stocks and targets a 4% yield. A minimum of 80% of the fund’s net assets will be invested in UK stocks while overseas equity investments are capped to 20%.
Commenting on the launch, Gary Tuffield, head of UK Sales at RWC, said: “Investors are sounding the alarm bell around the extreme valuations of growth stocks and are rotating into value names as monetary policy becomes less supportive.
“With many managers having drifted to a growth style in recent years, the timing of this launch is of fundamental importance: markets are becoming more discerning about the valuations of perceived stock market darlings, many of which are struggling to grow their earnings and are resorting to debt financed M&A to justify their multiples. As earnings begin to disappoint we could see a huge de-rating across many sectors which could potentially lead to significant losses.
“There is a real scarcity of value managers left to which investors can allocate, with many having capitulated on their approach or struggling with capacity management. In many ways the landscape doesn’t look too dissimilar to that of the tech boom in the late 90s where value investing had been consigned to the history books. In hindsight it turned out to be the trade of the next decade.
“Nick and Ian are arguably one of the most experienced portfolio management partnerships in the industry and we believe they are well placed to exploit potential opportunities that are beginning to arise as the shift from growth to value gathers pace.”