Fund overview
This core equity income fund invests in high yielding UK stocks, with a particular emphasis on companies generating significant free cash flow to fund sustainable dividend payments. The fund manager 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 is free cash flow yield on a prudently accounted basis as cash never lies. Bonds are avoided as they are viewed as a drag on capital performance.
Manager
Martin Cholwill joined RLAM in March 2005 as fund manager for the Royal London UK Equity Income Fund. Before joining RLAM Martin spent 21 years working for AXA Investment Managers where he managed a variety of UK equity portfolios, including the UK Equity Insurance Funds (1993 – 1994), the General Trust (1994 – 1998) and the UK Growth Trust (1991 – 1996), concluding as a specialist UK equity income manager when he took over management of AXA’s UK Equity Income Fund in 1996. Martin has a degree in Maths from Durham University.
Investment approach
The approach taken in managing this core equity income fund is to identify good companies with strong business models and sound finances that are able to deliver sustainable dividend growth. Martin has a preference for companies with robust balance sheets yet whose shares are sufficiently out of favour so that they can be purchased on a dividend yield premium.
This high conviction fund invests across a broad spectrum of industries in which Martin is able to identify value, in particular focusing on companies with attractive cashflow characteristics. This is important when identifying those companies that can consistently support a growing and sustainable dividend as it is cashflow, not ‘cashless’ profits, that pays the dividend and funds investment for future growth.
Stock selection, based on thorough company research including meeting management teams, is the main driver of performance for the fund. Macro economic factors are taken into account when considering company prospects. Martin would normally expect to hold between 40-60 stocks within the fund.