Aviva Investors US Equity Income II SC 2 GBP

Multicap North American equity fund run by River Road, a Kentucky-based advisor

  • 151.31p
    Price (Inc)

    These are the shares in the fund that pay out an income to clients. The income is made up of the total dividends – the money a company can pay out to its investors – from the companies in the fund.

  • 179.76p
    Price (Acc)

    These are the shares in the fund that don’t pay out an income to clients. Any dividends – the money a company can pay out to its investors – are reinvested into companies in the fund. Despite no income, the shares should be worth more over time. Good incentive, eh?

  • 0.00%

    Initial charge

    Some funds charge you when you first invest, which is aptly known as the initial charge. They’re usually between 3-5% but at Bestinvest, we usually don’t charge you a penny!

  • 0.75%
    Annual management charge

    This is how much the fund management company charges to run the fund. It’s like paying a babysitter, dog sitter or house sitter (that makes well-informed, heavily researched changes to improve your baby/dog/house when needed).

  • 0.89%
    Ongoing charges

    This stands for Ongoing Charges Figure. It’s the cost of running a fund and includes admin fees, manager fees, administration costs, etc.

  • 2.80%
    Yield

    How much the fund is currently paying out in income to investors. It’s NOT to be confused with the overall growth of a fund – a very different thing indeed. It’s also NOT a guarantee of future pay-outs, just a snapshot. This is more what it’s not than what it is…

Prices as at 29 May 2020, fund data last updated 03 October 2013

This fund is managed by a US affiliate company of AMG (River Road Asset Management LLC, based in Kentucky) and aims to deliver a dividend yield 1.5% higher than the Russell 3000 Value Index with the potential for capital growth. The value-orientated strategy invests across the market capitalisation spectrum, though portfolio companies will be at least $1bn in size. This fund is not allowed to invest in cluster munitions manufacturers.

Fund summary

Sector North America
Structure OEIC
Launched September, 2013
Size £253m
Yield 2.80%
Charging basis Capital
Dividends paid 28 Jan, 28 Apr, 28 Jul, 28 Oct

Charges

Standard initial charge 0.00%
Initial charge via Bestinvest 0.00%
Additional bid/offer spread 0.00%
Annual management charge 0.75%
Ongoing charges figure 0.89%

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Investment process

The managers River Road were bought by AMG from Aviva in early 2014, though the Kentucky-based investment team is autonomous. Their principal source of stocks is Value Line, a weekly paper publication that provides one page summaries of individual companies. The managers scan this manually for ideas in a similar way to a quant screen. However, they believe it is superior as the human factor means they can vary their criteria and avoid missing opportunities, though all stocks must yield more than 2% and have a market cap above $1bn. Arms manufacturers are excluded from this mandate. The screening process leads to a working universe of 200-300 companies, which they whittle down to a pretty stable portfolio of around 60 names. A company's market price must be 90% or less of River Road's appraised value to qualify for investment, with a target of 85% or less. The portfolio has 3 parts: Core (2-4% yield, stable large caps); High Alpha (3-6% yield, small & mid caps for faster growth); High Yield (>5% yield small & mid caps with lower growth potential).

Though this is a relatively new fund, we have performance data on the managers going back to 2003 which shows fairly consistent outperformance. Volatility has also been low and the strategy shows good downside protection even for an income fund. River Road's investment process is simple to understand, though it comes across as "old school" by comparison to some of their peers. The dividend yield and total return performance make this a credible choice for both income seeking and growth investors. Note that the managers' original strategy, Aviva Investors US Equity Income, is closed to new investors - this new fund is very similar but excludes some of the smaller holdings, hence it has a larger capacity.

Manager research

Average monthly relative returns

  • 15/16 0.28%
  • 16/17 -0.33%
  • 17/18 -0.14%
  • 18/19 -0.24%
  • 19/20 -0.97%

Bestinvest MRI

  • 3 years -0.45%
  • 5 years -0.28%
  • Career 0.07%
  • 3 years 7.40%
  • 5 years 18.40%
  • Career 83.40%

Performance figures are based on the average of monthly percentage returns relative to the benchmark index.

Thomas Forsha / Henry Sanders III

Forscha joined the investment industry in 1998 and River Road in July 2005. Prior to River Road, he was an equity analyst and portfolio manager with ABN AMRO Asset Management USA. He has a BS in Finance from the Ohio State University’s Fisher College of Business and an MBA from the University of Chicago Booth School of Business. He is a CFA charterholder and a member of the CFA Institute and the CFA Society of Louisville. Sanders joined the investment industry in 1989 and was a founding member of River Road. He is lead portfolio manager of River Road’s dividend all-cap value strategies. He previously worked at Commonwealth Trust Company, Bridges Capital Management and PRIMCO Capital Management. He earned the CFA designation in 1992 and is a member of the CFA Institute and a member and past president of the CFA Society of Louisville. He holds a BA in Business Administration from Bellarmine University and an MBA from Boston College. He has served as adjunct Professor of Finance and Economics at Bellarmine University.

Track record

Thomas Forsha / Henry Sanders Iii has 16.6 years experience of managing mutual funds in this sector. Over this period the average monthly return relative to the benchmark index has been +0.07%. During the worst period of relative performance (from September 2011 - March 2020) there was a decline of 29% relative to the index. The worst absolute loss has been 42%. Statistically, we estimate the probability that this fund manager is adding value, rather than being lucky, is 83%.

Periods of worst performance

Absolute -42.00% (May 2007 - February 2009)
Relative -29.00% (September 2011 - March 2020)

About the MRI

Our unique indicator: the Bestinvest Manager Record Index (MRI) measures the likelihood that the fund manager is adding value through their decisions. It is based on their performance record over the course of their career, adjusted for the amount of risk taken. MRI is an important contributor to our fund rating system but it is also vital to take account of qualitative factors. It is also very important to select funds to form a cohesive portfolio with an appropriate overall risk level.

Allocation

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Top 10 holdings

Data accurate as at 31 January 2020

3.64% Kinder Morgan Inc Delaware
3.5% Truist Financial Corp
3.34% Bristol-Myers Squibb Co
3.06% Corning Inc
2.82% Fidelity National Financial Inc
Source: Trustnet

Sector breakdown

Financial Services 18.00%
Communications 12.00%
Energy 11.00%
Health Care 11.00%
Consumer Staples 10.00%
Technology 9.00%
Industrials 9.00%
Real Estate 8.00%
Utilities 7.00%
Others 6.00%

Portfolio

50-75 stocks. 61% large caps (over US$15bn market cap); 34% mid caps (US$2-15bn); 5% small caps (US$1-2bn)

Constraints

Max 6% in one stock. Max 30% in one sector. Max 20% in overseas companies. Min daily trading volume US$4.5m. No arms manufacturers allowed.

Key Investor Information - Income

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Key Investor Information - Accumulation

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