GAM UK Equity Income
Launched in October 2017, this UK equity income fund invests in companies of all sizes – from the very small and those listed on the AIM stock market, through to the FTSE 100. The manager believes dividends are the most important driver of total returns and while he is targeting a yield higher than that given by the UK stock market, he is also looking for steady dividend growth. The manager can invest some money in a company's bond if he feels the opportunity is better.
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Chris Morrison has 12 years of investment experience, including 7 years at GAM. He joined GAM in January 2011, having previously spent five years as an investment manager at Bank of Tokyo Mitsubishi UFJ Asset Management UK Ltd on the long-only European desk. Chris holds a BSc in Economics and Mathematics from the University of Bristol and is a CFA charterholder.
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Company Description
Founded in 1983, Global Asset Management (GAM) operates in more than 10 countries worldwide, with offices in Europe, North America and Asia. Acquired in 1999 by UBS and then by Julius Baer in 2005, it separated from the latter in 2009 to form an independent, publicly-listed asset management group. GAM manages more than 60 investment strategies across a range of asset types, including fixed income, absolute return and funds of funds.
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Quote from the Fund Manager
We seek to understand the cash-generative nature of companies as this lies at the heart of their ability to pay dividends. Capital appreciation will follow if a dividend is strong and growing.
Adrian Gosden
Co-Manager
Investment process
The process for selecting and valuing companies is based on how much spare cash each business generates and their ability to pay dividends with this cash. Idea generation starts with a basic filter of the UK stock market to find companies with these good free-cash flow metrics. From here, they will do an industry assessment to understand what environment a company is operating in, including on regulatory considerations, competitor analysis, and pricing power. This will involve a large number of meetings with all types of stakeholders, including company management. The team carries out around 200 one-to-one meetings per year. The managers will be patient, making sure they buy the right stocks at the right price. Companies will be sold if the investment case breaks, or the share price reaches a full valuation.
Risk
Adrian can and will take full advantage of his 20% 'non-standard' holdings allowance, meaning he could at various stages hold some European companies and potentially bonds if they offer a better return profile than a company's shares. Adrian will keep the capacity of the fund limited, allowing him to be flexible in the portfolio positioning.
ESG
ESG - Limited
As mentioned, Adrian and Chris have a strong focus on governance within the process, ensuring they meet management before an investment and whilst they are holders. Within this, they will identify potential issues around sustainability, and engage with management teams, looking for continual improvements from each of their investments. Adrian and Chris do believe that companies without a coherent approach to ESG issues will face problems in the long-term, and will consider this when assessing the overall business case. However, with an investment time horizon for the fund of three to four years, the primary focus will be on valuations.
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