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Guinness launches new RDR ready ‘clean fee’ share class

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Guinness Asset Management has introduced a new clean ‘X’ share class with a 0.75% annual management charge and no rebate or trail. The new ‘X’ class will be available across all its funds and has been created in readiness for RDR, allowing platforms to unbundle their charges and to help advisers in their fee negotiations.

The share classes will be available shortly on intermediary platforms, including Transact, Ascentric, Nucleus, Raymond James and Cofunds Institutional as well as on direct to consumer platforms such as Interactive Investor. Direct investors to Guinness Asset Management will be allowed to buy into the share class under a short-term offer, with a minimum investment of GBP5000.

The Guinness Funds range currently includes seven funds available to investors in the UK: Guinness Global Equity Income Fund; Guinness Global Energy Fund; Guinness Alternative Energy Fund; Guinness China & Hong Kong Fund; Guinness Asia Focus Fund; Guinness Global Thematic Equity Fund; and Guinness Global Money Managers Fund. The firm launched five of these funds in December 2010, to complement the existing Energy funds, with the two Asian funds mirroring those already distributed in the US via Guinness Atkinson Asset Management, the firm’s sister company.

“Today, we have FUM of GBP0.5bn and we don’t see why GBP2bn in 5 years should be out of reach,” says Tim Guinness (pictured) CEO, Guinness, who is well known for his expertise in managing successful Global Energy funds. We focus on a relatively small number of specialist areas, where we can be best in breed and deploy our distinctive HOLT based, concentrated, low turnover style. We always seek to embrace innovation in the way we develop our products, and to price fairly. With the introduction of ‘clean fee’ share classes we are looking ahead to a post RDR world and assisting platforms and advisers wishing to clarify their position on fees.”

The new share class becomes available as one of the recently launched funds, Guinness Global Equity Income Fund, reaches GBP10m in size. Launched in December 2010, the Equity Income Fund has been the subject of a book build exercise over the last month, attracting increasing interest from institutional and private investors and over this period has grown from GBP0.3m to GBP10m today.

“We are particularly happy with the way our presentations of the Fund have been received,” says Dr Ian Mortimer, who co-manages the Fund with Matt Page. “We set ourselves the initial hurdle of getting the Fund to GBP20m early this year and are well on the way to achieving this: it is gratifying to see that others have endorsed our faith in the investment approach. We launched into the Equity Income sector, despite it being very competitive, because we were confident that our process sets us apart: not just because we look for quality companies from around the globe, but because our approach focuses on companies with a proven competitive advantage, and consistent growing dividends, that may be off the radar for other Funds”.

Guinness Global Equity Income Fund celebrated its first anniversary on 31st December 2011, delivering a positive return of 1.95% for the Retail ‘C’ share class shares, against a fall of 4.84% by the MSCI World Index placing it in the top quartile of the IMA’s new Global Equity Income sector. The Fund is the third best performer in the sector.

The managers, Ian Mortimer and Matt Page, are both Oxbridge physicists and, building on the Guinness HOLT based investment style, bring a unique perspective to their Fund’s investment process. The process identifies companies whose competitive strengths have enabled them to deliver consistently high cash flow returns on investment (“CFROI”). Each year, around 25% of companies deliver CFROI in excess of 10%. For inclusion in the portfolio, companies must deliver a 10% CFROI every year for ten years.

“We believe these proven cash-generative businesses are a particularly suitable investment right now. In low growth or declining markets, dividends become even more important as they often account for an even greater proportion of total returns,” says Page. “For example, in both the 1940s and 1970s – periods of sluggish economic growth, rising inflation and high unemployment – dividends accounted for over 75% of the total return of the S&P500.

“While UK companies have a long history of paying dividends, today just six companies account for over 40% of all UK dividend payments. High quality companies with long histories of paying dividends can now be found in many developed markets. More and more companies around the world are responding to shareholder pressure to adopt more progressive dividend policies, including those companies in emerging markets. A global approach therefore offers not only geographic diversification but access to a growing and broader range of dividend paying companies,” say the managers.

“We firmly believe in the strength of our investment process. We’re long-only equity investors so we’re not immune to the direction of the market, but our focus on undervalued, persistent cash generators identifies a basket of stocks that we believe is particularly suited to current difficult markets and can deliver steady long-term returns.”

 

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