Legal & General Investment Management (LGIM) has expanded its equity income product offering with the launch of the L&G European Equity Income Fund, a UK domiciled unit trust.
The fund invests predominantly in European companies, excluding the UK.
LGIM said it aims to generate an attractive yield above the market, while maintaining a total return mind-set over the longer term.
The fund is managed by fund manager Andrew Koch, who joined LGIM’s Global Equity Income team in 2014 from the in-house pension scheme at BAE Systems.
He previously spent 10 years at what was then Phillips & Drew, managing European, UK and Japanese equities. Phillips & Drew was later renamed to UBS Global Asset Management in 2002.
LGIM’s European income strategy has £450m of assets under management.
Over the course of last year European markets have grown in popularity with investors.
According to investment specialists some of the growth drivers include the constructive political developments in France, Germany and Holland, which have caused fears of extremist government policy to recede.
Financial markets have also performed well over the past couple of years as the economy has grown and risks have receded.
This positive picture in Europe has also occurred at the same time that the UK and US are experiencing periods of political and social instability, as a result of Brexit and Donald Trump’s presidency.
Provider view:
Mr Koch said: “We take a disciplined approach to portfolio construction, balancing an attractive current yield, the potential for dividend growth and the opportunity for attractive long-term total return.
“The portfolio is relatively concentrated with approximately 50 stock ideas. We invest in companies which represent the best examples of high-quality enterprises and which in our opinion look attractively valued versus their peers, their history and the market overall."
Honor Solomon, head of retail distribution, EMEA at LGIM, added: “An income approach remains important to our clients in the low-return environment and we are committed to providing our investors with a variety of income sources to suit their requirements.”
Adviser view:
Dennis Hall, chief executive at Yellowtail Financial Planning, said: "This is just what the world was waiting for, another fund, and a European Equity Income Fund to boot. Really, what’s the point of it? What makes this fund stand-out against the other 104 funds in the European funds sector – precisely nothing.
"It doesn’t compete on charges, there’s no performance history to judge, and no specific angle they’re trying to exploit other than income."
Robert Lockie, chartered wealth manager at Bloomsbury Wealth, added: “I have no recent experience in selecting one active manager over another. The only thing that jumps out at me is that 50 holdings is pretty undiversified, and as we like more rather than less diversification it’s not something we’d consider.
“However, there is an argument that concentrated high-conviction portfolios are better than more diversified ones, as the latter contain holdings in which the manager has less confidence. I’m not saying that they are wrong, but our philosophy is not consistent with that position.”
Charges:
There is no initial charge or performance fee. The ongoing charge figure is 0.8 per cent.
Verdict:
The renewed confidence in European markets might be attracting investors again. But as there are already many European Equity Income Funds for advisers to choose from LGIM will have to work out how it plans to stand out from the rest of them.
