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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.
Our opinion
Highly-experienced Adrian Gosden typifies an Elite Radar manager. Having previously co-managed the Elite Rated Artemis Income fund, he launched this concentrated, multi-cap income fund with GAM in 2017. The flexibility he has in running this fund is what makes it stand out in a highly competitive sector: he can be truly multi-cap, with about half the portfolio in small and mid-cap names, and he is not afraid to adjust the portfolio around quite rapidly, if his considerable experience identifies better opportunities.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.
Fund manager
Adrian Gosden set up this fund after leaving Artemis, where he co-managed the £6.4bn Artemis Income fund, as well as other mandates. In total he has more than 20 years' investment experience having previously work at SocGen running a UK Income fund and some institutional mandates. He holds a first class degree in Chemistry from St Hughs College, Oxford. He is supported by Chris Morrison, who holds a BSc in Economics & Maths from the University of Bristol as well as being a CFA charterholder. Chris joined GAM in 2012.
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 GosdenFund 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.
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.
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.
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