Three years’ hard work, helped by the hiring of a strong British equity team, has given LVAM a solid presence in the industry. Now the firm is building up its retail profile, writes Tomas Hirst.
“We’ve had a good year for performance. We haven’t just benefited from technical factors and as much of our relative outperformance has come from things we own as things we don’t own,” he says.
In particular, says Hillier, the present environment seems strongly to favour equity income investors. Several high-quality blue-chip companies are still being priced at historically low valuations and have high dividend yields.
Hillier mentions pharmaceuticals in particular, which are trading at about eight times earnings and some of which have a dividend yield that is higher than the bond yield.
However, Hillier, is keen to stress that the group is aware of possible dangers for global markets.
The looming threat of inflation is a persistent worry to financial market participants, as the consequences of extraordinary policy action by developed economies remain unclear.
“Our largest underweight is in government bonds,” he says. “Our biggest concern is that if the inflation genie isn’t controlled, central banks may be forced to raise rates earlier than expected. Central banks are currently trying to deny it while they attempt to repair their balance sheets but they’ll have to acknowledge it eventually.”
With the resurgence of sovereign debt concerns in the eurozone, many investors are looking through their portfolios for possible contagion risk. With the outcome of action undertaken to bail out ailing economies under debate, the end of 2010 looks as though it will not provide the quiet Christmas investors hoped for.
The LV= European ex UK Growth fund, however, appears to have held up well in difficult markets. Over five years the fund returned 7.18% to investors, against a 2.08% gain from the MSCI Europe ex UK index.
The performance has impressed McDermott, who says that Mark Page, the manager of the fund, is a “hidden gem” and will be picked up on by the broader market if he continues in his current form.
In this challenging environment, many groups could be tempted to launch products opportunistically to raise assets while more traditional products struggle. Roughead makes clear that launching funds on the basis of industry trends or perceived popularity of a theme is not in keeping with her vision of LVAM.
“We’re happy with our product range,” she says. “We don’t want to be known for launching products for the sake of it – for example, we don’t have a global fund as we’re not trying to fill that space. We want to concentrate on our strengths.”
That said, the group is not averse to working on products where there is clear demand from clients and LVAM has the resources to make the offering a success.
Hillier says that while Roughead is right that the business does not want to launch products for the sake of it, some possibilities are being considered.
“We closed down our US Growth fund because of poor performance but we do have a product in that area in incubation,” he says. “We’re also looking at an absolute return product.”
Whatever the outcome of these deliberations, LVAM will be hoping that it can build on the success of the past year.
This will mean the group focusing not only on performance but also on presenting its message to the market and expanding the investor base.
The response so far should be heartening. “They’re starting from a low base but I think they’ve got all the building blocks they need,” McDermott says. “What they need to do now is ensure that they stay near the top of the performance charts.
“It’s been a tough year for everyone and it doesn’t look like it is going to get much easier.”
- The best and worst funds for each group profiled in the Focus are shown on a relative rather than absolute basis. The percentile ranking of a group’s funds are shown relative to their respective sectors.