A US utilities fund giant is to launch a $3 billion (£2.3 billion) strategy it has been running domestically for four decades into the UK.
The Reaves Utility Income Ucits fund, which launches in May, invests in telecoms and energy utilities, largely in the US, although with a global remit.
The strategy is based on the US-domiciled Reaves Utility Income close-ended fund headed by Reaves chair Ronald Sorenson, chief executive Jay Rhame and vice president Tim Porter.
‘We can provide steady and high quality growing income,’ Rhame said. ‘Our portfolio tends to have a beta of 0.5%, so tends to be low in volatility. Over a rolling five-year period we have lost money just one time.’
The trio employ a bottom-up process, investing in 30-45 stocks. The fund targets a yield of 3.5% and over time aims to distribute 6% to investors when capital growth is added on.
The vehicle will levy an annual charge on an 'institutional founder' share class of 0.6% for early investors. Thereafter it will charge 0.9%, while retail investors will have to pay 1.25%.
Reaves, which was founded in 1961, has run the strategy for 41 years. According to the firm, it has delivered an annualised return of 12.77% versus an 11.67% return on the S&P 500. The strategy has generated positive returns in 99.8% of five-year rolling periods.
Sorenson added the fund's long-term performance dispels the myth that utilities are not growth stocks. 'There are utility companies in the US that can grow and earn dividends in the United States.'
‘People tend to invest in this sector for the macro reasons and don’t really want to do this and you never know what is going to come next. Utility regulation in Arizona can be very different to New Jersey.'