RWC Partners is to launch a UK equity income fund in anticipation that stock valuations will trigger market movements.
The fund will be launched in October and managed by Nick Purves and Ian Lance whose existing strategy, which is similar to that of the planned fund, has returned 3% “alpha” per annum since inception over 15 years ago.
The new fund will target a 4% yield through a “high conviction” approach and is being launched in response to investor demand, RWC said.
Gary Tuffield, head of UK sales at the firm, said investors were “sounding the alarm bell” around the “extreme valuations” of growth stocks, which meant they were rotating into value stocks as monetary policy became 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.”
Tuffield claimed there was a “real scarcity” of value managers left with whom investors could place money.
©2018 funds europe
