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A European equity income fund that aims to achieve an above average income without sacrificing capital growth. The approach is based upon rigorous and disciplined fundamental research combined with risk controls. Within its sector, the fund features in our 'Dividend Focus' category.
The fund's KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund's historic volatility is between 15% and 25%.
The fund's risk score is towards the lower end of the 15-25% range. The income bias has resulted in volatility that is lower than the benchmark, but broadly in line with other income-orientated peers. Different share classes could have differing SRRI scores.
The fund is co-managed by Brian Hall and Stuart Brown. Both managers are members of the extensive European Equity team, headed by Stefan Gries. The team incorporates a mix of portfolio managers, analysts and strategists. All are involved in the research process and as a team, they run a broad suite of product types.
The team members believe that rigorous and disciplined fundamental research, combined with sophisticated risk management controls, allow them to take advantage of inefficiencies in equity markets. They express this philosophy through high conviction ideas, whereby risks and opportunities are assessed and continuously challenged by colleagues.
The portfolio features between 40 and 70 stocks, with both stock and sector selection expected to contribute to returns. The Risk & Quantitative Analysis group produces a plethora of reports, such that portfolio risk is comprehensively understood. They will aim to balance income and growth in the portfolio, with 60% typically invested in above average dividend yields with the rest invested in dividend growers.
With bottom-up research at the centre of the process, the team operates a highly organised approach to generating new ideas and monitoring existing investments. This fund focuses on large and mid-cap stocks with market capitalisations above £1billion, which translates into around 350 companies. Internal and external screens are used to filter this universe and identify new ideas. The research aims to draw out the factors that influence a share price as well as an understanding of what the market is anticipating or missing. Through company meetings, they seek to assess management quality and understand business strategy, with a particular focus on identifying catalysts that have the potential to unlock value. Top-down research forms a lesser part of the process but they are able to draw from a variety of internal and external sources, with a view to identifying factors and themes that illuminate their company research.
The team operates in a highly collegiate fashion and there is a series of formal and informal meetings to facilitate communication. Analysts present new ideas at the weekly research meeting, with information captured within a standard template. Portfolio managers are responsible for ascertaining the appropriateness and impact of new ideas in their own portfolios. Buy candidates typically have strong management, a discernible competitive position, financial discipline and catalysts that they anticipate will trigger a market re-evaluation. A stock is sold when a price target is reached, the team's investment case alters - particularly in relation to the dividend payment - or, risk limits in relation to a particular stock are exceeded.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
At The Adviser Centre, our primary aim is to support financial professionals in their fund selection and suitability work through independently-minded research, borne of decades of industry experience. Our process is framed by the fundamental concepts of “quality”, “value” and “utility”, through which we answer the key questions of why to invest in a fund, how it is likely to behave and how it can be deployed.
The Adviser Centre team members are some of the most experienced in the fund research industry. We can always look forward to robust and constructive discussions and we have great respect for their views and perspectives, which, given the breadth of their fund and market knowledge, come from an extremely well-informed position.
We have known and worked with the team for several years and we value their experience and the insights they provide to our own investment process. The service differentiates itself by its more focused nature and the information on their factsheets is useful in emphasising a fund’s key mandate, exposure and style biases, helping to explain the risk/return journey that our customers can expect.
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