Matterley LLP, the recently launched equity fund management and private equity specialist, has today unveiled a fund aimed at capitalising on emerging value in the UK market.
The Undervalued Returns fund, which will have a portfolio of 40-50 mainly UK listed stocks, aims to achieve long-term capital growth with a ‘value’ focus.
Managers on the fund will be Henry Dixon and George Godber who have worked together over the last seven years with Dixon at New Star on the buy side and Godber at Credit Suisse on the sell side. Dixon previously ran retail, ethical and institutional portfolios at New Star while Godber was a director within the equities division at Credit Suisse.
The firm also announced all Matterley Partners will be investing in the new portfolio.
Commenting on the launch, Dixon says: “We think we have a fund of particular interest to people who feel there is real value emerging in the market but are well aware there are still issues regarding financial leverage in the UK economy. The portfolio’s constituents currently derive c75% of their revenue from overseas and this will become increasingly attractive as sterling weakness unfolds.
“With this overseas bias there are two overriding principles that govern stock purchases. Firstly we will buy stocks where we deem that returns on invested capital are being undervalued, as judged by the price investors are being asked to pay for that invested capital. Secondly stocks will be purchased if they are standing at a material discount to their replacement cost.
“The common denominator is a focus on the balance sheet. This will continue to be a key determinant of stock performance."
At launch, the managers will take advantage of protracted sterling weakness which they believe will assist outperformance from sectors most exposed to overseas earnings such as Pharmaceuticals, Aerospace & Defence and Mining. The fund will also focus on lowly rated cyclical stocks with international exposure as a moderation in the inflation outlook paves the way for interest rate cuts.
Matterley is a private partnership, and is wholly owned by its founding partners, Ian Dighé, John Head, Henry Dixon, George Godber and Jonathan Cudlipp, who have over 80 collective years of working in the financial services industry.
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