Dan Mannix became chief executive of RWC at the end of February, replacing Peter Harrison. He joined RWC in 2006 as a senior member of the management team and has been heavily involved in the growth of RWC’s investment teams, as well as leading its business development team.
What are your main priorities for the role?
Having worked very closely with Peter Harrison for over seven years our priorities remain consistent. Our business is built around a strong belief in true active management with a focus on increasing the real value of our clients’ assets with transparency and clarity on how we aim to achieve these returns. We focus on helping our investors understand that short-term performance will often distract from the long-term objectives of active management and therefore we look to engage with our investors through the cycle to meet and exceed their expectations.
What are the main issues for institutional investors?
The main area our investors are focused on is how to find yield and diversification from their core assets. Most funds need to generate returns of at least 6-8% in order to fund their future liabilities at a reasonable cost. Pension funds will find it impossible to close deficits without some exposure to growth assets but pension fund regulation forces many investors to favour bonds over equities. The issue today is that bonds offer low volatility and high probability of capital protection but are priced for poor returns and will be disastrous in an inflationary environment; while equities offer some inflation protection, a decade of equity market volatility and drawdown means funds are loath to take on additional risk in order to reach these return targets. The issues for many institutional investors, therefore, are how to: increase the potential returns on their portfolio; generate a stable investment income; and provide an element of inflation protection but without exposure to a large degree of volatility and drawdown risk.
How can institutional investors best navigate the current low yield environment?
A low volatility equity income strategy is one possible solution to this problem and in particular, combining equity income with a quality strategy is the key to reducing volatility and drawdown. Secondly the majority of this equity return is likely to come from dividend yield rather than valuation shift (given the above average starting point) or growth (given the economic outlook). This is one of the key reasons why investors should be considering an equity income strategy as part of their portfolio today. Although there are a number of sources of yield available from non-traditional sources it is imperative that the liquidity of the underlying is matched with the liquidity of the investor.
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