RWC Partners is launching a high conviction UK equity income fund for veterans Nick Purves and Ian Lance on the back of investor demand.
The fund, which launches in October, will use an intrinsic value strategy, investing in between 25 and 45 UK stocks spanning the market capitalisation spectrum and across sectors, aiming to deliver a 4% yield.
Sitting in the IA UK Equity Income sector, the fund will hold at least 80% of its assets in UK-listed stocks with the flexibility to invest up to 20% in global equities.
Purves and Lance invest over £3bn on behalf of their clients at RWC - including the £224m RWC Enhanced Income fund co-managed with John Teahan - and have been managing value-based strategies for over 20 years.
Gary Tuffield, head of UK sales at RWC, said: "Investors are sounding the alarm bell around the extreme valuations of growth stocks and are rotating into value names as monetary policy becomes 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 added there is "a real scarcity of value managers left", as many have switched their approach or had to limit funds' capacity.
"In many ways the landscape doesn't look too dissimilar to that of the tech boom in the late 1990s where value investing had been consigned to the history books," he said. "In hindsight it turned out to be the trade of the next decade.
"Nick and Ian are arguably one of the most experienced portfolio management partnerships in the industry and we believe they are well placed to exploit potential opportunities that are beginning to arise as the shift from growth to value gathers pace."
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