Three points on why the fund is one to watch:
- Richard Marwood is a stock picker with a focus on high conviction stock ideas and the risk profile of the fund reflects this. The key measure of value, used by the investment team, is free cashflow yield on a prudently accounted basis; cash never lies. Profits can be very misleading especially with the use of exceptionals, revenue recognition policies and off balance sheet vehicles. They believe that profits only matter if they convert to cash and even ‘profitable' companies go bust - cashflow pays for capital expenditure and dividends, and profits do not. It is this unique stock picking approach that differentiates the UK Equity Income fund from its peers and is one of the primary reasons that we expect the fund to generate alpha.
- The RLAM Equity team comprises highly experienced fund managers. Individuals are responsible for research in their respective market sectors with information being actively shared and disseminated across the entire team. We believe that our approach to research provides value to all our clients in that it allows them to benefit from the aggregated experience of the whole team, refined over many years and across a variety of market conditions. Our approach also allows each member of the team to bring their own perspectives and insights to the sectors and companies that they research.
- Our approach is to invest in companies with growing dividends, backed by growing, sustainable free cashflow. The fund manager invests using a traditional methodology to equity income; he does not utilise a barbell approach in which some stocks pay very high dividends and others low dividends. Each individual stock must meet the strategy's equity income cashflow criteria, be backed by a strong business model and sound finances, and be able to deliver sustainable dividend growth. Furthermore, the fund is still paying an attractive level of income and it is yielding circa 3% which is very attractive vis-à-vis gilt / credit yields.
For more information on Royal London Asset Management, click here.
