RWC has launched a global equity income fund for its UK income team.
The RWC Global Enhanced Dividend Fund will be managed by Ian Lance, John Teahan and Nick Purves who joined RWC in 2010 from Schroders—which promptly bought a 49% stake in RWC.
The three currently manage $4 billion in equity income funds for RWC, including the model for the new fund, the $560 million UK-focused RWC Enhanced Income Fund, launched upon their arrival in 2010.
RWC said the new fund targets institutional investors, offers global equity exposure and targets a yield of around 6%. Of this, 3% is to come from a portfolio of “high-quality defensive equities”—cash-generating companies with strong balance sheets, high returns and reasonable starting valuations—and 3% from the sale of out-of-the-money call options on fund holdings. In aggregate, said RWC, the companies held in the fund portfolio will be less volatile than the broader index while the call over-writing strategy will further reduce volatility—in a falling market the fund will keep the premiums from the option strategy.
When managers are unable to find companies meeting their investment criteria at low starting valuations, they will hold cash.
RWC said the new fund has already attracted investors from the UK and “strong interest” from overseas.
Said Lance in a statement: “[T]the broader remit allows this fund to avoid many of the risks associated with stock and sector concentration associated with UK funds. For example in pharmaceuticals where the UK opportunity is limited, a global approach allows us to access companies such as Elli Lilly and Johnson & Johnson which are just as appropriate for what we are looking to achieve.”
Added Teahan: “Being a call writing strategy it is clear that income is the central objective. We endeavor to deliver a steady cash flow to our investors through quarterly distributions from the fund and grow those distributions in line with inflation.”
RWC CEO Dan Mannix said the firm's assets under management have doubled in the past 18 months to $9 billion—including net inflows of more than $1 billion in Q1 2014.