RWC Partners to launch high conviction UK equity income fund for Purves and Lance

RWC Partners’ equity income veterans Nick Purves and Ian Lance will launch a new high conviction UK equity income fund in October 2018 on the back of demand from investors.
Purves and Lance, who invest over £3bn on behalf of their clients at RWC, have been managing value-based strategies for over 20 years. An existing strategy managed by the team for over 15 years, which follows a similar approach to that of the new fund, has generated 3% alpha per annum since inception[1], putting it in the top decile versus UK income peers.
Gary Tuffield, Head of UK Sales at RWC, commented: “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.”
The new fund will be managed to capitalise on the valuation opportunities that arise from market overreactions and over-emphasis on short-term company and macro considerations. The fund will follow a high conviction intrinsic value strategy, investing in c. 25-45 stocks across the UK market capitalisation spectrum.
At least 80% of the fund’s NAV will be in UK-listed stocks with the flexibility to invest up to 20% in overseas equities. The fund will be broadly diversified across sectors but could be materially underweight or omit completely a number of sectors if deemed unattractive. The portfolio is targeting a 4% yield and sit within the IA UK Equity Income sector.
[1] Performance quoted is gross of fees and relates to a UK mandate actively managed by Nick Purves since 29 December 2000 whilst he was employed at Schroders, and then subsequently at RWC Asset Management LLP from 18 August 2010. Source: Bloomberg, 29 December 2000 – 30 June 2017