PARTNER INSIGHT: In the final part of this series, Royal London Asset Management (RLAM) equities trio Richard Marwood, Henry Lowson and Martin Cholwill discuss the future of UK equities.
Talking to Investment Week editorial director Lawrence Gosling as part of a new series of video interviews, Richard Marwood, co-manager of the £794m UK Growth fund, said he looks at the quality of dividend yields to assess the health of the UK equity market.
He said: "One thing I always look at is where are we in terms of dividend yield. Is there still an attractive dividend yield to be obtained by investing in the equity market? Is it better than what you can get with cash on deposit, or bonds of a reasonable quality?
"If you are prepared to look through short term volatility and invest in that yield there is a very strong long term case for investing in equities.
"Then within that, it is incumbent on us to look for the dividends that can grow so that attractive income can be maintained and grown."
Meanwhile, Martin Cholwill, manager of the group's £1.9bn UK Equity Income fund, discussed the positive aspects of the UK market which he feels investors often overlook.
"The UK has high corporate governance standards overall and there is a clear legal framework when investing whereas perhaps in some economies you might be less sure about the quality of numbers," he said.
The manager added the benefits of investing in the UK stock market, which can give you exposure to domestic companies but also international opportunities.
He added: "Looking at the UK stock market you can also invest quite internationally. If you are patient, then great, investment opportunities will come up in UK equities. It is a world capitalised market and there are lots of companies to choose from."
Marwood and Henry Lowson, manager of the £274m RLAM UK Smaller Companies fund also noted that international interest has been seen in the UK from the amount of takeover bids being made.
Lowson said: "One strand of commonality between those [takeovers] is that they are UK assets being acquired by foreign trade buyers.
"Exports for companies with a UK cost base are going to be positively affected by weak sterling. It makes them more competitive in terms of their product portfolio abroad."
Helped by pension freedoms
Completed merger in August
'Very volatile commodity'
£25bn single strategy business
Strategic partnership with Ventre and Zagame