Royal London Asset Management’s (Rlam) Ivor Pether does not expect a return to dividend increases at Aviva in the near future in spite of declaring himself a “happy holder” of the insurance giant.
Mr Pether has been backing new chief executive Mark Wilson’s efforts to turn the business around following poor share price performance since March last year, soon after Mr Pether took control of the £491.7m Royal London UK Equity fund from Jane Coffey.
Although this means he suffered Aviva’s dividend cut in August, Mr Pether said he was keen to back the long-term restructuring story of the insurer, having seen the company’s share price increase by more than a third in less than a year.
“Aviva has been a quite appealing restructuring story under the new chief executive,” Mr Pether said.
“It has been a very badly managed business for a number of years. Historically it hasn’t managed to convert capital generation to cash generation to back the dividend, but in theory there is no reason why it shouldn’t be able to do that.
“The question is at what point will it translate into a dividend increase. My thought is that is later rather than sooner. The underlying trends are going in the right direction – I’m a happy holder.”
The manager said he was also monitoring the situation at RSA, another insurance company which was also forced to slash its dividend at the beginning of 2013. Former Royal Bank of Scotland chief executive Stephen Hester was named as the new boss of RSA earlier this month.
Mr Pether said: “We don’t hold RSA, which goes back to the reasons for the dividend cut and how fixable those reasons are. Clearly those reasons are historic practices and we need to be completely happy they are contained. It is something we are looking at.”
Mr Pether, who has worked at Rlam since it was founded in 1988, was appointed manager of the UK Equity fund a year ago following the departure of head of equities Jane Coffey, who left after 11 years with the firm “to pursue other interests”, as Rlam stated at the time.
Since he took charge, the fund has gained 16.4 per cent, according to FE Analytics, beating the FTSE All-Share index’s 14 per cent rise but lagging the IMA UK All Companies sector’s average return of 20.9 per cent.
The manager said the UK Equity fund would be run broadly in line with other pension mandates that he oversees.
This means he aims to beat the FTSE All-Share index, but Mr Pether emphasised the fund’s style would not be “aggressive”.
Among the manager’s changes to the portfolio in the past 12 months has been an increase in exposure to the US, through positions in equipment hire firm Ashtead and building materials supplier Wolseley.
He has also backed high street newsagent chain WH Smith and builders merchant Travis Perkins.