RWC Partners has launched the TM RWC UK Equity Income Fund for Nick Purves and Ian Lance with £60m of client money and a further £100m already expected to follow in the next few weeks.
On the timing of the launch Ian Lance, Portfolio Manager, commented: “The prevailing macroeconomic environment of falling interest rates and quantitative easing has been supportive for growth stocks (long duration assets) over value stocks (short duration assets). This monetary stimulus has now peaked and gone into reverse as the Federal Reserve increases interest rates and begins to shrink its balance sheet and the ECB taper their asset purchases. It should come as no surprise that this has led to value stocks starting to outperform growth stocks particularly given the elevated valuations that the latter group were starting from.”
Gary Tuffield, Head of UK Sales at RWC, commented: “Given the backdrop of outflows from the IA UK equity sectors (as reported last week) it may appear contrarian to have launched this fund. However, over the last six months we have been working with a significant number of our clients in the UK to meet their need for an income fund with a disciplined value approach.
“Ian and Nick are some of the longest standing intrinsic value investors in the sector and are providing the opportunity for investors to express a need for both income and value through the new fund.
“Not only has value, as an investment style, been out of favour but the UK market has also failed to attract investor interest as evidenced by the persistent outflows from IA UK sectors. We believe that the tide is turning, and that the UK market now also offers real potential value.”
Ian Lance added: “We believe that we are at the start of a multi-year shift from growth to value. There are times, as we have seen recently, when income investors get pushed into buying stocks with high yields and many income funds in the UK become clustered around certain ‘quality growth’ companies like tobacco stocks.
“We think the over-valuation of these companies is one of the biggest risks in markets today, and with investors starting to reappraise their exposure to the funds that hold them, we think it is the opportune time to launch a fund focused on an intrinsic value style of investing.”
The TM RWC UK Equity Income Fund, RWC’s first managed UK OEIC, therefore focusses on the opportunities in value stocks Nick, Ian and their team believe are inherently undervalued, and sits within the IA UK Equity Income sector.
At launch the portfolio has exposure to names including Capita, Marks & Spencer, Tesco and WM Morrison. The fund also has around a fifth invested in financials – including Standard Chartered, Barclays and RBS.
Purves and Lance, who invest over £3bn on behalf of their clients at RWC, have been managing value-based strategies for more than two decades. An existing strategy managed by the team for over 15 years, which follows a similar approach to that of the new fund, has generated c. 3% alpha per annum since inception1, putting it in the top decile versus UK income peers.”