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View the article online at http://citywire.co.uk/wealth-manager/article/a746847

M&G’s Rhodes sells BlackRock for Aberdeen income opportunity

by Dylan Lobo on Apr 17, 2014 at 10:42

M&G’s Rhodes sells BlackRock for Aberdeen income opportunity

M&G Investments’ Stuart Rhodes believes Aberdeen Asset Management is a better income play than BlackRock following the sell-off in emerging markets.

The manager of the M&G Global Dividend fund, which targets companies with a ‘bullet-proof track record of dividend growth’, made the move on concerns about US valuations.

This concern is reflected by the rise of BlackRock, which Citywire + rated Rhodes (pictured) sold at around the $325 mark this year having bought into the firm at around $175 at the end of 2011.   

‘In the US it’s getting harder to find companies on reasonable valuations capable of dividend growth and the slightest disappointment in earnings could lead to a nasty correction,’ Rhodes told a conference in Paris. 

‘[At the same time] we are starting to see valuation opportunities in emerging markets and have moved the fund to take advantage of these opportunities, which have the potential to deliver compelling dividend growth.’ 

Other US stocks Rhodes has sold out of this year include insurer Chubb, futures exchange operator CME Group, toymaker Mattel and tobacco firm Reynolds American.

Alongside emerging markets-focused asset manager Aberdeen, these profits have been recycled into companies such as South African logistics firm Imperial Holdings and casino operator Sands China.

Comfortable valuation

According to Rhodes, his portfolio has only seen one dividend cut in the last three years and these fundamental changes have left him feeling very comfortable about the fund’s valuation.

‘The valuation of the fund is down and is now cheaper than the market and that feels good. I believe we have some good opportunities for dividend growth, which sets up for good performance. The valuation of this fund is looking more attractive than it has done in the last two-and-a-half years.’ 

He added: ‘The fund has a significant yield premium to the global market and dividends are still growing nicely. I feel confident in my ability to outperform in 2014.’

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