LV= to soft launch UK equity fund

LV= Asset Management is responding to client demand for income with the soft launch of a UK equity income fund targeting a yield 10% above that of the index.

The LVAM UK Equity Income fund will be managed by Chris Price and is designed to reflect the strategy of an internal product.

The fund has already been seeded with £15 million of internal money ahead of its launch at the end of the month, which is awaiting regulatory approval.

It aims to achieve a high level of income combined with long-term capital growth investing principally in UK equities but with the flexibility to invest in gilts, corporate bonds and money market instruments.

In the six months to the end of December, the internal mandate performed in line with the FTSE All-Share, with a loss of 21.08% versus the benchmark loss of 21.12%.

The fund, which will sit in the IMA UK Equity Income Sector, will take a focused approach across approximately 50 holdings.

Price will take a combined bottom up/top down strategy looking for long stocks with strong cash flow in defensive sectors, such as telecoms, while also adding a sprinkling of cyclical plays.

Price said he optimistic about the prospects for the UK in 2009 but warned that careful stock selection is vital in the current environment and the first half of the year is going to be particularly tough.

He said: ‘There are a lot of  stocks out there that look like they are high yielding, especially in the retail and house builder sectors, but the reporting season could see a lot of dividend cuts.

‘The first and second quarters of 2009 are going to be very difficult and once we get through the reporting season we will see a lot of downgrades. However at least then the bad news will be in the price which is not always the case at the moment.’

Price was more positive about the latter half the year, saying he thinks the UK may have reached the bottom by then.